Ask YC: Liability insurance for a 1099?

Well, this is a first for me. I'm negotiating a contract with one of those we-find-you-work agencies, and while they are willing to let me work as a 1099, rather than a W2 contractor, they insist that I have liability and worker's compensation insurance. This is the first time I've been asked to provide insurance, and a quick Googling doesn't seem to have much in the way of answers.

But, there's lots of smart people here, and likely some of you who do your own contracting, so you get to deal with this all the time, right? Right?

I realize this doesn't fit in the 'startup' category, but six months' worth of contracting income can run a startup for more than a couple of months... and should keep me from having to take any student loans for grad school.

Thanks-in-advance!