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How Much Is Independent Contractors Insurance?
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How Much Is Independent Contractors Insurance?

IT contractors who work on their own often don't think of themselves as small businesses – until they're asked for proof of insurance from a client. Luckily, independent IT contractors insurance that helps you win clients doesn’t have to break the bank.

For example, an IT contractor who works alone might expect to pay roughly…

  • $425 to $483 / year for General Liability Insurance.
  • $475 / year for Umbrella Insurance.
  • $641 to $1,100 / year for Workers' Compensation Insurance.
  • $860 to $956 / year for Errors & Omissions Insurance.
  • $1,850 / year for a Fidelity Bond.

We'll review each type of coverage and typical coverage limits below.

Before we get into that, be aware that if you use a 1099 to file your taxes instead of a W-2, you're probably classified as an independent contractor. Independent contractors might be expected to carry insurance to:

  • Prove they're financially prepared to handle unexpected mistakes.
  • Comply with client contract requirements.
  • Comply with lease requirements to rent an office.

The insurance cost estimates on this page are based on an independent contractor with up to $150,000 in annual revenue who works in programming or web design. The cost of your business insurance will depend on your actual revenue, your state, and the type of services you provide.

Worth noting: We provide two prices – an average and a median. That's because sometimes a few expensive policies drive up the average cost, even though the majority of our customers pay a lower rate, which the median cost reflects. Providing both price estimates gives you with a clearer picture of what you might expect to pay.

How Much Does General Liability Insurance Cost for IT Independent Contractors?

General Liability Insurance is the first commercial policy most IT contractors buy. It offers protection when third parties are injured or get their property damaged on your business premises (think: a visiting client trips over a cord and breaks a leg).

General Liability Insurance Quote:

  • Average General Liability Insurance cost: $483 / year
  • Median General Liability Insurance cost: $425 / year

Coverage Amount

$1,000,000 General Liability per Occurrence
$2,000,000 General Liability Annual Aggregate
$1,000,000 Personal & Advertising Injury per Occurrence
$2,000,000 Products Completed Operations Aggregate
$300,000 Damage to Rented Premises
$10,000 Medical

How Much Does Umbrella Liability Insurance Cost for Independent IT Contractors?

An Umbrella Liability Insurance policy offers additional coverage if you face a claim that exceeds the limit of your General Liability Insurance policy. If you're not sure whether you can benefit from Umbrella Insurance, ask your agent for more details.

Umbrella Liability Insurance Quote:

  • Average Umbrella Insurance cost: $475 / year.
  • Median Umbrella Insurance cost: $475 / year.

Coverage Amount

$1,000,000 Per Occurrence and Aggregate
$10,000 Retention (Deductible)

How Much Does Workers' Compensation & Employer's Liability Insurance Cost for Independent Contractors?

Most employers are legally required to carry Workers' Compensation Insurance. Even if you don't have employees, you may want to carry this coverage to address the cost of your own work injuries or illnesses. Requirements vary by state, so check the rules where you live. Visit Insureon for a comprehensive analysis of Workers' Comp costs across all industries, as well as a state-by-state guide to Workers' Compensation laws.

Workers' Compensation Insurance Quote:
Employer's Liability

  • Typical premium cost (based on state rates and payroll): $641 to $1,100 / year.

Coverage Amount

$1,000,000 Bodily Injury by Accident, Each Accident
$1,000,000 Bodily Injury Disease, Each Employee
$1,000,000 Bodily Injury Disease, Policy Limit
State Class Payroll
IL 8859-02 $140,000

* Owner / officer payroll may have been adjusted to state guidelines.

How Much Does Errors & Omissions Insurance Cost for Independent Contractors?

Errors & Omissions Insurance (also called Professional Liability Insurance) offers coverage when a client claims your professional negligence caused them financial harm. So if a client sues you for failing to uphold the promises in your contract, you would likely make a claim on your Errors & Omissions Insurance policy.

Errors & Omissions Insurance Quote:

  • Average Errors & Omissions Insurance cost: $956 / year.
  • Median Errors & Omissions Insurance cost: $860 / year.

Coverage Amount

$1,000,000 Per Occurrence
$1,000,000 Annual Aggregate
$2,500 Deductible

The Errors & Omissions coverage and premiums quoted above doesn't include unauthorized access and malicious code coverage. This may be important if you provide security services for your clients –including firewall and antivirus application services. The additional premium is typically around five percent.

It also doesn't include intellectual property liability coverage. This is sometimes referred to broadly as intellectual property liability and cyber liability coverage and is most often required by software developers, web developers, ASPs, etc. If you want more information about protection against these risks, please contact us.

Claims-Made Notice:

All Errors & Omissions policies quoted are issued on a "claims-made" basis. This means that coverage is only provided for work that is done and claims that are filed while the policy is in force. For more details, see our article "What Is Claims-Made Liability Coverage?"

How Much Does Fidelity Bond Insurance Cost for Independent Contractors?

Fidelity Bond Insurance, also known as Third-Party Employee Dishonesty Insurance, provides coverage if you steal money, equipment, or other assets from one of your clients. If you provide IT services for a bank or financial institution, there's a good chance you'll be required to carry a third-party fidelity bond. It doesn't mean they think you're going to rip them off. It's just standard operating procedure for many financial companies.

Fidelity Bond Quote:

  • Typical premium cost: $1,850 / year.

Coverage Amount

$1,000,000 Limit
$50,000 Deductible

How You'll Be Billed for Your Business Insurance

In most cases, you will receive a bill directly from your insurance carrier for the following insurance policies:

  • General Liability.
  • Workers' Compensation.
  • Umbrella.
  • Fidelity Bond.

The carrier typically sends an invoice four to six weeks after your coverage starts. Errors & Omissions Insurance is the exception. In most cases, you'll need to pay in full before starting coverage, though we can sometimes arrange financing through a premium finance company. You can expect to pay about 30 percent of your premium down, plus 15 percent interest.