If you're an independent contractor, freelancer or sole proprietor, it's likely up to you rather than an employer to provide your insurance protection. Chuck and Grant discuss the various options available to those workers in the growing industry.
Below is a transcript of the episode, modified for your reading pleasure. For more information on the topics discussed in the episode, see the links at the bottom of this post.
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Grant FINLEY: This is Your Insurance Connection Podcast. Thanks for listening. I'm your host, Grant Finley, joined by Chuck Hembree, the President of CLH Insurance. Chuck, nice to see you today. How are you?
Chuck HEMBREE: Good morning, Grant, good.
FINLEY: Today I want to talk about a segment of the work force that is increasing, the independent contractor. I see more and more businesses trying to outsource how they hire and I'm more interested in how an independent contractor, freelancer, et cetera needs to focus on insurance. There's health insurance, there's workers compensation, there's all different types and when you're an employee you want to have insurance and as an independent contractor, either you're responsible for it yourself or maybe the employer that you're going to go work for has something to offer too and that's where I'm in the grey. So I'm hoping we can iron out some of these things and address how the independent contractor should approach insurance.
HEMBREE: Well, Grant, you're not the only one in the grey area. A lot of our freelancers or independent contractors go out because they want to be their own boss. They don't want to work with a big corporation anymore. Well, part of the job of being your own boss is trying to figure out, how do I professionally handle my business, what are my responsibilities, what are the requirements that are out there, what don't I need so that I'm not over insuring so I can run an efficient, yet professional small business where I am the master and I control my destiny? So, yes, all the insurance products that you talked about can come into play depending on what type of independent contractor or freelancer that I am.
FINLEY: So, I guess maybe my confusion comes in with, is a B.O.P. - would I need that? Just a general liability, or do those not really fit for an independent contractor? Is there a one size fits all type of coverage like those for the independent contractor specifically?
HEMBREE: Well, we can use all of ours. The business owners policy, the BOP that you referred to, workers comp, a general liability policy - depending on what type of business I am in, that will determine what type of coverage I have. Now, let's think about the business owners policy that you talked about. A business owners policy is a package of your general liability and your property as well, all wrapped up in one with a lot of the coverages that a small business owner would need. But it's very specific in what kinds of businesses it covers and doesn't cover, so we may not be eligible for a business owners policy. Most of the time that will be a good place for us to go. There are other insureds though that don't have much property. They're a consultant - maybe they just need general liability, so that's where you're going to need to rely on the expertise of your agent or broker to put you where you best fit in the insurance industry model. But, there isn't a one size fits all because there are all kinds of contractors all over the spectrum of industries and experiences that are out there.
FINLEY: Right, so one that comes to my mind is a blogger, or somebody who might sit at home but is working online. Maybe they're a ghost writer or maybe they're - whatever it could be. Is there a coverage they could get like a liability so if they get sued for slander or libel? I don't know, I hope it's not the same question but what would the writer need that the construction worker wouldn't?
HEMBREE: Well, obviously general liability is needed for either one of them. Let's think about what general liability is. General liability covers most of the exposures that we owe to the general public. When we own a business of any kind, we owe it to the public and our customer to carry out our business in a properly, prudent way. That's where legal liability comes into play. Underneath the general liability, we protect the public for any bodily injury that we might cause them, for any property damage that we might cause them, and then you hit it, and it's not in all of our homeowners but is in most commercial policies - it's called personal and advertising injury. Personal injury includes libel, slander, false imprisonment, wrongful arrest, beyond that though, we might need professional liability. A contractor generally is not going to need it but someone in the communications business, or if I'm an architect, or a consultant, I may need professional liability and that's not covered by the general liability too. Again, you're kind of relying on your industry, resources and your agent.
FINLEY: So what if I have an in-home business and I sell stuff through Ebay or Amazon? I might not necessarily have a warehouse that am responsible for. Maybe I can outsource that through Amazon, which has a service where you can do that. I'm not leaving the home, I'm working at home, is there a reason why I should think that my homeowners wouldn't cover me? Because the homeowners is supposed to cover you wherever, so to speak, knock knock, but why wouldn't the homeowners cover me?
HEMBREE: That's one we run into all the time. So, we've got a home-based business and let's think about what the homeowners was created for. It was created and it's priced to cover the residential or personal liability - all the exposures that we would run into as a person, not as a business. Business brings more exposure than when we get in up in the morning, have breakfast, run the kids to school , go out to our regular day, come back, have dinner, go to sleep, and work in the yard and that kind of thing. Those are our personal exposures and the cost of a homeowners does not contemplate the additional exposures that a business on premises brings. Almost every time they are excluded in the homeowners. Now, I don't want to mislead our consumers and say that you can't get any coverages underneath a homeowners, but the un-endorsed homeowners will not have it. So, there's a couple of things that we can do in that regard. Some markets, and many of ours here at CLH, have a homeowner business based endorsement that can be added to the homeowners for an extra cost that can, in some cases, take care of that. Or a stand alone home-based business policy can be added in personal lines. They're not very expensive and they can take care of many of our AVONS, giving piano lessons within the home, a small tax accounting business out of our home, a blogger and they'll add some of that personal injury and so forth. But, those are very limited and the normal contractor is not going to be able to get those. We're going to need a stand alone commercial policy that covers it. Again, I think - insurance is pretty complex and sometimes we don't want to think of it as complex, but it is. We need the services of a knowledgeable agent who can help us go through that maze and decide which one is the least expensive for us and which one gives us the coverage we need for the exposures we have.
FINLEY: So for medical I'm assuming you get on the marketplace through the ACA and get it yourself or can I rely on whoever might hire me for my temporary appointment to provide medical coverage if I need it?
HEMBREE: Well, you're talking about a couple of things. If it's work related injury our soul resource may be workers comp, so even though we may not have to buy workers comp in the state of Missouri or in Kansas, or some of the surrounding states here, they may require me. So they're assured that if I have a work-related injury I've got coverage there. Now, it may be that I don't have to have it for the state and I'm going to take on that risk myself since I'm a sole proprietor and so I just buy a major medical policy and that is going to take care of most work-related injury. But, it's not going to take care of the lost wages. It doesn't take care of the disability that I might incur and it doesn't take care of the third party liability that the workers comp requires in case somebody sues me because of a work-related injury. Workers comp still will have an important part that major med may not be able to fit, but those are the two choices we have and certainly, a sole proprietor or independent contractor needs to consider which is best for them in their job role.
FINLEY: So, biggest takeaways today: if you work in the home, you might be able to add on an endorsement that will help for your specific line of business. If not you can probably get a business owners policy or a BOP if you fit those specific parameters. You're probably going to need a general liability regardless of if you're outside the home, but the biggest of the biggest is that to find out what you need, talk to your broker or agent because they're going to be able to get you the best situation. Am I wrong in saying all that?
HEMBREE: No, I think you've got it. We provide the general liability, what form it takes place in, and then insureds need to help the agent understand what are all their exposures. Do they have inland marine exposures for property that they take off premises and take around that they need special coverage on? Do they have contents? Are they subject to need professional liability? Most good agents will have the markets and the availability of companies that will help them and help you as a customer work through what you need to properly insure your small business as an independent contractor.
FINLEY: Perfect. Well, don't be shy. If you're out there and you own your own business or you're a sole proprietor, or your just thinking about trying to give it a shot on your own doing something that you enjoy, give us a call. We'd love to work through it with you and make sure that you're in a good situation so that you can pursue your dreams. If you don't have anything else, Chuck, I think we can wrap it up with that.
HEMBREE: Thank you, Grant. I think that does it.
FINLEY: Perfect. Thanks for listening and we will catch you on the next episode of Your Insurance Connection Podcast.
Your Insurance Connection podcast can be heard on iTunes and Stitcher or by visiting clhins.com/content/podcast. If you like what you’ve heard you can support this podcast by rating and/or sharing it on your social platforms. CLH Insurance is a “Trusted Choice”, independent agency servicing Missouri, Kansas and Illinois. For more information on CLH Insurance, visit clhins.com or call 636.391.0700 to speak with an agent. Until we connect again, thanks for listening.
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Show Notes - Where you can learn more about the people and ideas discussed in this episode.
BOP - Business Owners Policy
Personal & Advertising Injury
ACA - Affordable Care Act