Workers’ Comp Insurance for the Self-Employed: Do I Need It?

July 22, 2021 | Workers' Compensation

Workers’ comp insurance for the self-employed tends not to be required by law. So, if you work for yourself, including as an independent contractor, you might not have to carry it.

But, importantly, there are certain circumstances where workers’ comp insurance may be needed for other reasons. For example, some companies require that the businesses that do work for them have their own self-employed workers’ comp coverage as shown on a Certificate of Insurance or COI.

Workers’ compensation insurance can also help protect you as a self-employed individual or independent contractor from medical expenses related to on-the-job injuries or illnesses. Plus, a self-employed workers’ comp policy can help replace lost wages while you’re recovering.

Get a Quotechevron_right

Business woman on the computer

Protect Your Future—Should You Carry Workers' Compensation?

Workers’ compensation is crucial insurance in situations where someone is hurt while working. That’s why we’re often asked, “Do I need workers’ comp insurance for myself?” or “Do I need workers’ comp insurance if I’m self-employed?” 

If you’re self-employed, workers’ comp requirements can be complicated. But, we answer these and other important questions below.

What are the Rules Regarding Workers’ Comp for the Self-Employed and Subcontractors?

If you work for yourself or contract with others to do work for you, it’s critical to ask yourself some questions about workers’ comp insurance. What are the rules regarding workers’ comp for the self-employed and subcontractors? Do you need workers’ compensation insurance if you are self-employed or hire subcontractors?

It’s important to note that if you hire subcontractors, your state may require that you purchase workers’ compensation insurance (sometimes referred to as workman’s comp insurance) to cover them. This can be true even if they have their own self-employed workers’ comp insurance policy. The key is whether your state classifies subcontractors as “employees” or not.

Navigating Workers' Compensation as an Independent Contractor

If you’re an independent contractor, it’s critical to understand your business relationship with the individual or entity that hires you. Generally speaking, someone is considered an employee if they receive a W-2 tax form and an independent contractor if they get a 1099. However, laws vary from state to state, so it’s important to review the laws for your state.

Choosing not to have a workers’ comp policy even though you are obligated to do so isn’t something you can simply correct if the authorities discover you don’t have coverage. You will likely face significant consequences even if you acknowledge the error and buy a policy promptly. Penalties like fines and even jail time are possible for failing to provide workers’ comp insurance coverage if it’s required.

But that unpleasant scenario is something you don’t have to experience! The good news is that workers’ compensation coverage is affordable and easy to obtain. With biBERK, you can purchase it online and have the policy active as soon as the next day in most cases.

Get a Quotechevron_right

Workers’ Comp for the Self-Employed: What Does Coverage Cost?

The cost of self-employed workers’ comp insurance—like the requirement for having it—varies from state to state. It’s based on gross annual payroll, but the rate varies. In most states, biBERK has filed some of the lowest prices for self-employed workers’ comp coverage. For example, the average cost per $100 in wages ranges from $.75 in Texas to $2.74 in Alaska.

If you need self-employed workers’ comp coverage for yourself or a subcontractor, you can get a self-service workers’ comp quote online in minutes. You can also purchase a policy and report a claim online. And if you have questions, a licensed biBERK insurance expert is happy to answer them. Contact us at your convenience.

Beyond Workers’ Comp for the Self-Employed: Other Vital Small Business Insurance

In addition to workers' comp, self-employed individuals and independent contractors can benefit from many different small business insurance policies, including:

  • General liability insurance. This policy can cover many types of legal liability, from non-employee “slip and fall” injuries to damage caused to client property.
  • Business owners policy or BOP (also called property & liability insurance). A BOP combines liability coverage with protection for company property. 
  • Professional liability insurance. Also called errors & omissions insurance (or E&O), this coverage is for mistakes made by a business that cause a client or customer a financial loss.
  • Cyber insurance. This coverage is added to another policy, like general liability, and protects the business from the financial repercussions if sensitive data is stolen and used to commit fraud. 
  • Umbrella insurance. An umbrella policy can provide protection up to its limit when a claim exceeds the limits of other liability coverage. 

Each type of policy provides a unique type of protection, but all can help protect your business from unexpected financial burdens, since even one lawsuit can be more than a small business can afford without insurance.

Can I Use My Own Insurance Instead of Workers’ Comp?

People who have their own health insurance and work for a company with workers’ compensation insurance may wonder, “Can I use my own insurance instead of workers’ comp if I’m injured at work?” 

Each state has its own workers’ comp system and every health insurance company has its own rules about coverage for injuries. Consequently, it’s critical to talk with your employer and your insurer about on -the-job injuries—ideally before one occurs. 

It’s likely that your private health insurance company will require you to file a workers’ comp claim. But having the facts about your financial protection from work-related injuries and illnesses is important and reassuring.

Understanding Your Responsibilities—Workers’ Compensation for Employers

Although we’re focusing on the self-employed in this article, it’s crucial to understand that there can be a fine line between being self-employed and being an employer.

You may feel like there are people who work with you but who don’t work for you. However, it is important to know how your state views that relationship. If those responsible for overseeing workers’ compensation requirements determine an engagement to be employer-employee in nature (a distinction known as worker classification), you may have legal obligations to carry workers’ comp insurance.

Also, if you own a business and have workers’ comp for your employees but you also hire independent contractors as needed, it is vital to know what’s required of you regarding covering them.

The key is not to make assumptions. It does take some time and effort to connect with the proper authorities and get specifics on your workers’ comp insurance requirements. However, having that conversation can prevent you from facing a significant financial burden from failing to carry coverage.

And, of course, getting the definitive word on your workers’ comp obligations (or lack thereof) will relieve any stress you have about this issue and help you sleep better at night!

A Crucial Question: Do I Need Workers’ Compensation Insurance? 

If you’re asking yourself, your state authorities, or your insurance provider, “Do I need workers’ comp insurance if I’m self-employed?” you’re taking an important step in protecting yourself financially from the ramifications of work-related injuries. 

Workers’ comp insurance for the self-employed may not be legally required, but carrying it can benefit you. So, whether you’re starting a new business, shifting to an independent contractor business model, or simply have never thought about workers’ comp coverage, it’s important to consider it now.

You may discover that it’s not required for you and, therefore, choose not to buy a policy. But, quite often, self-employed people see the benefits of having coverage for work-related injuries and decide to carry coverage. Either way, you owe it to yourself to make a well-informed decision.

FAQs on Workers’ Comp Insurance for the Self-Employed

What if I don’t have any employees? Do I need workers' comp insurance?

Even if you don’t have any employees, getting self-employed workers’ comp for yourself might be wise—especially if you work within a high-risk industry such as construction or manufacturing. Having a self-employed workers’ comp policy means you are financially protected if you get injured and cannot work to earn money. 

What if I hire subcontractors instead of employees? Do I still need self-employed workers’ comp to cover them?

It all depends on the state you reside in. You might be legally exempt from having to cover contractors with workers’ comp. However, we recommend getting covered with workers’ comp, whether you hire full-time employees or temporary workers. Workers’ comp protects you and others if someone gets sick or is injured while working with you. 

If I have a pre-existing medical condition, can I get workers’ comp for the self-employed?

Yes. Having a pre-existing medical condition does not affect your ability to get self-employed workers’ comp coverage. However, it’s important to point out that workers’ comp payouts and benefits only cover illnesses and injuries related to work. 

For instance, a worker with a pre-existing back problem will not receive benefits related to that issue unless the problem is worsened by a work-related incident such as a fall.