What All Independent Contractors Need to Know About Usage Based Business Insurance

As a small business owner, protecting your business is an important priority but today’s litigious environment may expose your business to threats you might not even be aware of. Aside from protecting your business, we fully understand insurance can be a barrier to work because its traditional format doesn’t adapt to the gig economy.

The insurance industry is highly regulated and if you asked Bunker’s CEO, Chad Nitschke, he would say it is not exactly the most progressive industry. By 2020, 43% of the U.S. Labor force will be comprised of gig economy workers. This alone speaks to what Bunker has been trying to work towards: adapting insurance offerings for the contingent workforce. The most frustrating aspect of business insurance for independent workers is often the lack of flexibility with policy length. Many independents do not need insurance for a full one-year term that traditional insurance policies offer; that’s why Bunker created usage-based insurance.  

What is Usage Based Insurance?

Usage-based insurance allows independents to acquire the proper amount of insurance for a contract and only pay for the term of that contract. It seems logical, but it’s actually the first-of-its-kind in the small business insurance industry.  Usage-based insurance also allows independent contractors to choose a policy based on customized coverage tiers, easily purchase the policy online, and includes Certificates of Insurance for all of the clients you might have.

With usage-based insurance, you can customize the amount of clients and months you need coverage for. There are no annual commitments and you purchase what you actually need. Traditionally, 1099 workers had to purchase one-year policies no matter the length of their contract, and it could take weeks to receive a policy.  Today, policies are issued instantly and once you find a project, you can take your contract requirements to Bunker and start work the next day knowing you are 100% compliant with your contract.

To better understand usage-based insurance, meet Brandon. Brandon is a graphic designer and digital media consultant. He typically has three to four short contracts going at any one time, pulling in an average of $130,000 per year. Brandon typically works remotely for these projects, and his clients require General Liability ($1 million limit) and Professional Liability ($2 million limit). Brandon can select the coverage and limits he needs, select the desired policy length (e.g. three months) and purchase the policies online.

Brandon is just one of many independent contractors required to purchase these standard business requirements to fulfill contractual requirements. By purchasing the usage-based insurance, Brandon can instantly obtain the coverage he needs for the amount of time his project runs.

Tools and Tips for Streamlining Your Insurance Quote

Before you fill out an application for business insurance, make sure you have the below ready to make the process easier and get your quote faster.

  • Know your estimated annual revenue and what your payroll will be. Even if you are a sole entity, have an estimate of what your annual take home pay will be.

  • Know your entity type and have your documentation ready. Is your business a LLC, Corporation, etc?

  • Have your tax identification number

  • For more complicated insurance requirements, it is helpful to have a copy of your contract and/or a copy of your Statement of Work. This informs the insurance advisor about your role and what risks you might be exposed to.

  • Having an updated resume is helpful to detail what your business does and keeps you on track so you can find your next gig.

  • Always remember- the more information you provide the more expedited the process of obtaining insurance will be easier