Independent contractor

A self-employed worker without a single employer with a distinct legal and tax status.


What is an independent contractor?

An independent contractor is a person, business or corporation that provides goods or services under a written contract or a verbal agreement. Independent contractors don’t work regularly for a single employer. Instead, they work as required, and they can work for a number of companies and business entities at the same time.

What’s the difference between an independent contractor and self-employed?

‘Independent contractor’ and ‘self-employed’ may seem like similar work status classifications, and they’re often used interchangeably. Understandably so, because both refer to individuals who work for themselves. But there are three key differences between them:

  1. Self-employment refers to different forms of working for oneself, including independent contracting. 
  2. Self-employed workers own the company where they work. Independent contractors work with various business entities but they don’t have ownership in them.
  3. Both self-employed workers and independent contractors each have distinct legal and tax implications.

What complicates things further is that federal, state and local governing authorities might have different classifications for self-employed individuals and independent contractors. For example, what the IRS considers ‘self-employed’ may not be aligned with another federal agency or state government.

What are the benefits and drawbacks of being an independent contractor?

Independence is the cornerstone of an independent contractor. It means:

  • You’re free to work with whomever you choose. 
  • You can negotiate your fees for each service performed. 
  • If you’re working on different projects, you have great variety in your work.
  • Your income can potentially be higher.
  • You can deduct expenses from your income taxes to reduce your tax rate.

As with everything, there are drawbacks to being an independent contractor as well:

  • You have to drum up your own sources of business.
  • Your income can be inconsistent — especially if your work is seasonal. 
  • You must make sure you’re tax-compliant.

Do independent contractors need small business insurance?

Independent contractors could benefit from coverage from potential losses and liabilities.

For example, if you’re a contracting financial advisor and a mistake in your paperwork accidentally leads your employer to lose out on significant tax advantages, they may take you to court. Business insurance could help you recover the cost of damages and legal fees so you don’t have to pay out of pocket.

What type of insurance are most important for independent contractors?

Many independent contractors consider:

How NEXT helps independent contractors

NEXT provides fast, affordable independent contractor insurance customized to your specific business needs.

Apply online, answer a few questions and get an instant quote in less than 10 minutes. Once you’ve chosen coverage, you can get a certificate of insurance and share it 24/7 via web or app.

If you have questions, our licensed, U.S.-based insurance professionals are ready to help.

Start a free instant quote with NEXT today.

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Business insurance is divided into different policies. We offer seven types so it's easy to design the coverage that fits your business.
General Liability insurance
General Liability
Protect yourself from accidents that cause physical injury or damaged property.
Professional Liability or Error and Omissions Insurance
Professional Liability/E&O
Shield yourself from lawsuits that claim your work errors caused financial losses.
Workers' Compensation Insurance
Workers’ Compensation
Cover medical bills and lost wages if your employees have an accident at work.
Commercial Auto Insurance
Commercial Auto
Stay on the road with coverage for dents, tows and damage to someone else’s vehicle.
Tools & Equipment Insurance
Tools & Equipment
Upgrade your general liability coverage to protect any gear that’s stolen, damaged or lost.
Commercial Property Insurance
Commercial Property
Keep your building, inventory and equipment protected from fire or water damage.
Business Owner’s Policy Insurance
Business Owner’s Policy
Combine general liability and commercial property into one policy to protect your business.
* To the extent permitted by law, applicants are individually underwritten, not all applicants may qualify. Individual rates and savings vary and are subject to change. Discounts and savings are available where state laws and regulations allow, and may vary by state. Certain discounts apply to specific coverages only.
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Issuance of coverage is subject to underwriting. Not available in all states. Please see the policy for full terms, conditions and exclusions. Coverage examples are for illustrative purposes only. Your policy documents govern, terms and exclusions apply. Coverage is dependent on actual facts and circumstances giving rise to a claim. Next Insurance, Inc. and/or its affiliates is an insurance agency licensed to sell certain insurance products and may receive compensation from insurance companies for such sales. Policy obligations are the sole responsibility of the issuing insurance company. Refer to Legal Notices section for additional information.

Any starting prices or premiums represented before an actual customer quote are not guaranteed and are representations of existing premiums of active policies as of December 6, 2023. To the extent permitted by law, applicants are individually underwritten, not all applicants may qualify. Individual rates and savings vary and are subject to change. Discounts and savings are available where state laws and regulations allow, and may vary by state. Certain discounts apply to specific coverages only.