If you work for yourself, you might assume workers’ compensation insurance is only something businesses with employees need. But the answer isn’t always that simple. Depending on your business structure, state requirements, contracts and the type of work you perform, workers’ comp may be something you need—or something worth considering even when it isn’t required. If you have any questions, contact our office at or complete our online quote form today!
What Is Workers’ Compensation?
Workers’ compensation insurance is designed to help provide benefits when an employee experiences a work-related injury or illness. Depending on the circumstances and applicable state laws, workers’ comp can help with medical expenses and a portion of lost wages.
For self-employed individuals and independent contractors, the situation can be different. Some states may not require sole proprietors without employees to carry workers’ compensation coverage, but that doesn’t necessarily mean going without coverage is the right choice.
What If I’m a Sole Proprietor?
If you’re a sole proprietor with no employees, you may not be legally required to purchase workers’ compensation insurance. Workers’ compensation requirements vary from state to state, so it’s important to understand the rules that apply to your particular business.
There is another consideration that many self-employed business owners overlook: what happens if you are the one who gets hurt while working?
Imagine you’re a contractor who injures your back while lifting a piece of equipment. You have health insurance, so you may assume your medical expenses are covered. However, health insurance policies may exclude injuries or illnesses that are work-related. Without workers’ compensation coverage, you could potentially be responsible for the costs associated with your injury.
What About Independent Contractors?
Independent contractors and 1099 workers are generally considered self-employed rather than traditional employees. In many cases, they are responsible for obtaining their own insurance coverage.
However, a contract with a general contractor or another business may require an independent contractor to carry workers’ compensation insurance. This means that even if your state doesn’t require you to have coverage, a contract could make it a requirement for a particular job.
It’s also important to understand how workers are classified. Simply calling someone an independent contractor does not automatically make them one. Misclassifying an employee as an independent contractor can create tax, insurance and legal complications for a business.
What If I Hire Employees?
The rules can change significantly once you have employees. Most states require businesses to carry workers’ compensation insurance once they reach certain employee thresholds, although those requirements and exemptions vary.
If you’re planning to hire your first employee, don’t assume your existing business insurance is enough. Talk with your insurance professional about workers’ compensation requirements before bringing someone onto your payroll.
Workers’ Comp Isn’t the Only Coverage to Consider
Workers’ compensation can address work-related injuries and illnesses, but self-employed business owners may face other risks as well.
Depending on your business, you may also want to consider:
-
General liability insurance for certain claims involving bodily injury or property damage
-
Errors and omissions insurance for claims related to professional mistakes or services
-
Commercial auto insurance if you use a vehicle for business purposes
-
Other business insurance based on your industry and specific operations
-
The right combination of coverage depends on how your business operates and the risks you face.
So, Do You Need Workers’ Comp If You Work for Yourself?
Maybe—and that’s the surprising part.
Working for yourself doesn’t automatically mean you can ignore workers’ compensation. Your state laws, business structure, employees, contracts and industry can all affect whether coverage is required. Even when you aren’t legally required to carry workers’ comp, having coverage may help protect you financially if you suffer a work-related injury or illness.
If you’re a self-employed business owner or independent contractor in Amherst, MA, reviewing your insurance coverage can be a smart part of protecting the business you’ve worked hard to build. Talk with an Encharter insurance professional about your specific situation and the coverage requirements that may apply to your business.
Chat with an Encharter agent about your insurance today:
Complete our online quote form
Source:
The Hartford, “Workers’ Compensation for Self-Employed & Independent Contractors”
