Becoming an independent contractor: Insurance

First published in 2017; updated November 2026.

Initially, when I sat down to write this, I was considering just the need for independent contractors to have liability insurance.

Then I started to think … what about health insurance?

As an independent contractor, you are solely responsible for your health insurance. From shopping for the right policy to paying the monthly premium, you are the one tasked with ensuring that coverage is there.

Liability Insurance

The same goes for liability insurance. That is where I will start.

According to insureon.com, independent contractors need general liability insurance because, if something goes wrong, the client may be left with the bill, and that is something they may not accept if you bid on work without liability insurance.

Here are three reasons why independent contractors need liability insurance:

To ensure that contractors can pay lawyers' fees and damages if they're sued over their work.
To ensure that clients who hire contractors don't end up paying if the contractor is sued.
To meet statutory requirements in states and industries where everyone needs to be covered by insurance (for example, in construction).

General liability insurance can cover things like: bodily injury, slip and fall accidents, copyright infringement, product liability, slander and libel and property damage.

While there is a cost involved in carrying liability insurance, that premium is considerably less than what you would have to pay if found liable for damages and you don’t have insurance.

Health Insurance

In the US, getting health insurance as an independent contractor has changed a great deal since the ACA marketplaces opened in 2014. Now, getting insurance is no harder than going to the HealthCare.gov Marketplace and starting the process of applying.

From there, you can find out if you qualify for various tax credits or even low-cost coverage.

The federal fee for not having health coverage no longer applies, but a few states have their own requirement to carry qualifying health coverage, for example California, Massachusetts, New Jersey, Rhode Island and the District of Columbia.

When you are in the Marketplace, you are required to estimate your annual net income. However, as an independent contractor, that can prove to be a bit difficult. The federal government tells you to “do your best to estimate your self-employment income and expenses for the year.” Of course, if your estimates are off, you can always update your Marketplace application.

In the end, both liability and health insurance are important to have as an independent contractor and should be one of the first things you explore as you enter the world of contracting.

This is general information, not insurance or tax advice. Talk with a licensed insurance agent or a tax professional about your own situation.

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