Insurance Requirements for 1099s Under Subcontractor Agreements: What You Need to Know

As an independent contractor, you’re used to wearing many hats—marketer, operator, accountant. But if you’re working under a subcontractor agreement, there’s one more role you can’t afford to overlook: risk manager.

Many freelancers assume their client’s insurance will cover them. That’s rarely the case. More often, subcontractor agreements include specific insurance requirements that 1099 contractors must meet—or risk losing the contract (or worse, footing the bill when something goes wrong).

As an industry expert in insuring 1099 professionals, I’ll break down what those requirements typically include, why they matter, and how to get compliant coverage without overpaying.

🔍 Why Subcontractor Agreements Require Insurance

Subcontractor agreements are legal contracts. They often transfer risk from the hiring company to you, the independent contractor. To limit their liability, many companies require subcontractors to carry their own coverage. These agreements protect:

• The hiring company’s assets 
• Their reputation 
• Their own insurance premiums (by preventing claims under their policy) 

For you, the right insurance coverage shows you’re professional, prepared, and compliant—a must if you want repeat business and strong referrals.

📋 Common Insurance Requirements in Subcontractor Agreements

1. General Liability Insurance

Most agreements require this foundational coverage. It protects against third-party bodily injury, property damage, and legal costs.

• Typical limit required: $1 million per occurrence / $2 million aggregate 
• Why it matters: If you accidentally damage property or injure someone while performing your work, you’re covered. 

✅ Required for: Construction workers, landscapers, consultants who visit client sites, and creatives doing on-location work.

2. Professional Liability Insurance (Errors & Omissions)

If you provide advice, services, or digital products, this coverage protects you from client claims of negligence, errors, or missed deadlines.

• Typical limit required: $1 million+ 
• Why it matters: Even minor mistakes can result in costly lawsuits. 

✅ Required for: Freelance consultants, developers, designers, editors, and accountants.

3. Workers’ Compensation Insurance

Even if you’re a solo 1099 contractor, some clients (especially in construction) require you to carry your own workers’ comp.

• Why it matters: Covers your medical bills and lost wages if you’re injured on the job. 

✅ Required for: Contractors in high-risk industries or states where independent contractors must show proof of WC coverage.

Pro Tip: Some states mandate workers’ comp even for 1099s if you operate under certain business structures (like an LLC or S-corp).

4. Commercial Auto Insurance

If you drive for business purposes—even in your own vehicle—subcontractor agreements may require a commercial auto policy or hired/non-owned vehicle coverage.

• Why it matters: Personal auto insurance may deny claims for business use. 

✅ Required for: Delivery drivers, mobile technicians, construction workers, and any freelancer using a vehicle for work.

5. Umbrella/Excess Liability Insurance

Larger subcontractor agreements (especially in government or corporate settings) may require an umbrella policy to extend your liability limits.

• Why it matters: It adds an extra layer of protection if a claim exceeds your standard policy limits. 

📂 You May Also Need to Provide:

• Certificates of Insurance (COIs): To prove your coverage and list the hiring company as an additional insured. 
• Waivers of Subrogation: Preventing your insurer from suing the hiring company. 
• Endorsements: Confirming coverage types, limits, and compliance with contract terms. 

💡 How to Stay Compliant Without Overpaying

• Bundle Policies: Many 1099s can save by bundling General Liability and Professional Liability in a Business Owner’s Policy (BOP). 
• Customize Your Coverage: Don’t overpay for unnecessary extras. Work with an insurer who understands subcontractor requirements. 
• Update Your COIs Regularly: Keep your documents current and accessible to avoid contract delays or violations. 

🔒 The Bottom Line

Whether you’re a freelance construction worker, consultant, or creative, subcontractor agreements are contracts—and insurance is often part of the deal. Not only do these requirements protect your clients, but they also protect you, your income, and your business’s long-term reputation.

At Bunker, we specialize in helping 1099s get the exact coverage they need—quickly, affordably, and contract-compliantly. Let us help you say “yes” to more projects with confidence. If you’re interested in learning more please visit buildbunker.com or contact us at support@buildbunker.com!