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6 types of insurance for independent contractors in 2024

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8 mins

As an independent contractor, a company may pay you for the same work as a regular in-house employee.

For example, let's say you're a graphic designer and the company has several in-house graphic designers who do the same job. However, the company does not withhold income tax, Social Security, and Medicare from the money they pay you like it does for its employees. In addition, you can't get insurance through the company, despite the fact that you do the same work as the other graphic designers.

It's a good idea to learn more about the different types of insurance you do need. Let's take a look at the types of insurance you should strongly consider getting as an independent contractor.

Health insurance for independent contractors

You don't want to go without health insurance for even a day. Let's say you suddenly realize you don't feel good, go to the hospital and realize that you need an appendectomy. An appendix removal can cost you more than $15,000. How will you pay for it if you aren't insured? In addition, you may get charged even more for care than what would otherwise be covered by an insurance plan.

Let's take a look at a few options you can tap into for health insurance.

Industry health insurance

Let's say you choose to freelance as a graphic designer full-time. You might find a freelancer's union that offers lower-cost health insurance. This group of people belongs to the organization and they pool their money together into a fund. The fund pays for major health care costs for the members in the group — and you get insurance.

Learn as much as you possibly can about the insurance coverage and costs before you purchase this type of health insurance, however. You may pay more for it instead of getting it on the Health Insurance Marketplace.

Health insurance marketplace

Check out the Health Insurance Marketplace for more information about your insurance options. In most states, the federal government runs the Marketplace. Your state may run its own Marketplace on a different website. You can shop for and enroll in medical insurance online, by phone, or with in-person help.

Private health insurance

Private health insurance simply means that you get health insurance coverage from a private entity instead of your state or through the federal government. You'd find insurance through an insurance broker or a company. Compare the costs of private health insurance versus the Marketplace or another type of insurance before you choose this option.

Learn More: What Does Health Insurance Cover (& Not Cover)?

Life insurance for independent contractors

Life insurance might not seem like a huge necessity when you're juggling an independent career, bills, quarterly taxes, and maybe even family life as well.

However, life insurance covers your family if you die unexpectedly with debt, other bills, and obligations to your family. The main two types of life insurance include term life insurance and whole life insurance. Let's go over some quick definitions of each:

  • Term life insurance: Generally the most affordable option, term life insurance offers coverage that expires over a set term. You will no longer get coverage after your term is up. Common terms include a yearly- (or annually-) renewable term, such as 5-, 10-, 15-, 20-, 25- and 30-year terms. You can also choose a term until a specified age, such as age 65. If you die before the term expires, your beneficiary or beneficiaries will receive the payout.
  • Whole life insurance: Just like it sounds, whole life insurance offers permanent death benefit coverage for your entire life. Whole life insurance pays a death benefit to your beneficiaries but also contains a savings component. In other words, a cash value builds up as part of the policy. Sometimes you can tap into that cash value policy when you're still alive.

Talk to a licensed agent or broker about your policy and how to buy life insurance. You want to shop around for a life insurance policy by comparing quotes from multiple insurance companies. You may need to get a medical examination after you complete the application and wait until underwriting occurs on your policy. As long as you sign the documents and pay for your policy, you'll keep your policy for its entire duration.

Learn More: Life Insurance for Self-Employed Individuals

Disability insurance for independent contractors

You may not want to imagine a situation where you are unable to work. However, take a second to imagine what that would do to your family — and consider this: One in four 20-year-olds will become disabled before the age of 67, according to the Social Security Administration. Knowing that, you may want to seriously consider getting short-term disability or long-term disability, particularly because as an independent contractor, you don't get coverage through an employer.

You want to shop for the right individual disability insurance plan by finding a licensed insurance agent. You'll also want to get multiple quotes from different carriers. Ask questions about the various policies and make a decision based on the type of policy and carrier that fits you best and submit an application.

Breeze helps independent contractors find affordable disability insurance. Get an instant quote!

Liability insurance for independent contractors

As an independent contractor, know that you can get sued just as easily as any other small business owner due to damaging client property, causing bodily harm, or slander. For example, let's say you go to clients' homes to teach their kids how to play the piano. You accidentally injure their child with a heavy music stand. Liability claims can cost you a lot out of pocket if you don't have coverage.

Furthermore, your clients may want you to have it before they agree to work with you. Without insurance, they might fear that they will be on the hook for mistakes or accidents caused by you.

State regulations sometimes require independent contractors to carry general liability coverage. In fact, both you and your client should obtain separate general liability insurance policies.

Purchase general liability insurance from an insurance provider and request a certificate of insurance so you can prove you have it.

Unemployment insurance for independent contractors

President Biden signed into law a $1.9 trillion COVID-19 relief bill known as the American Rescue Plan (ARP) in March, which allowed a $300 per week federal unemployment supplement (including a state unemployment supplement) until September 6, 2021.

The law also extended the Pandemic Unemployment Assistance (PUA) and Pandemic Emergency Unemployment Compensation (PEUC).

Under PUA, self-employed workers could get unemployment if they meet certain criteria through Labor Day 2021. When Congress passed the Coronavirus Aid, Response, and Economic Security Act (CARES) Act, independent contractors could get unemployment benefits.

In order to take advantage, you must have:

  • Been diagnosed with COVID-19 or experienced symptoms,
  • A member of your household that has been diagnosed with COVID-19,
  • Cared for a family member with COVID-19,
  • Primary caregiving responsibility for a child unable to attend school due to COVID-19,
  • Become the breadwinner after the head of your household has COVID-19,
  • Had to quit your work due to COVID-19 or
  • Had your work location closed as a direct result of a COVID-19 public health emergency.

Workers' compensation insurance for independent contractors

Workers' compensation insurance, or workers' comp, involves providing wage replacement and medical benefits to employees injured on the job.

If you work as an independent contractor for another company, you can't get covered under the company's workers' compensation insurance policy. In other words, if you get injured working for that company, you can't tap into its workers' compensation benefits like its employees do.

Though states generally do not require self-employed independent contractors to have workers’ comp insurance, you can carry your own workers' compensation insurance. For a relatively small monthly fee, it can compensate you for large losses that result from covered occurrences. Many major insurance carriers offer workers' compensation policies or a private market where you can purchase workers' compensation insurance. Do your research to determine which coverage option works best for you.

Learn More: Workers' Comp vs. Disability Insurance

Get all the insurance you need

Although boring and oftentimes confusing, insurance is one thing independent contractors cannot afford to take lightly. Depending on the type of work you do, you may need more insurance than outlined in this list. Learn more about what different types of carriers offer so you can protect yourself and your family.

Melissa Brock is the founder of College Money Tips and a full-time freelance writer and editor. She loves helping families navigate their finances and the college search process.

The information and content provided herein is for educational purposes only, and should not be considered legal, tax, investment, or financial advice, recommendation, or endorsement. Breeze does not guarantee the accuracy, completeness, reliability or usefulness of any testimonials, opinions, advice, product or service offers, or other information provided here by third parties. Individuals are encouraged to seek advice from their own tax or legal counsel.

— Published July 14, 2021
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