Why Contracts Require Companies Without Employees to Carry Workers' Comp Coverage

Workers’ compensation insurance may be a requirement for most employees in most states, but what about self-employed workers who don’t work with anyone else? This type of insurance compensates employees who are injured on the job and the amount of coverage required usually depends on the risks related to their line of work. So, what if your self-employed job isn’t as risky as, say, a construction job?

Whether or not independent contractors or other self-employed workers need this kind of coverage depends on a number of factors, including special risks.

Self-Employed and Permanent Employees

Workers who sign a W-2 tax form are considered employees and most likely the company they work for is required to carry workers’ compensation insurance. This coverage provides funds for expenses related to most work-related injuries, including lost wages and medical bills. When adding this kind of coverage, the employee gives up the right to sue their employer for injuries.

Most states do require that every company with at least one employee purchase this kind of coverage. However, some states, such as Texas, do not require workers’ compensation.

For freelancers, contractors, or sole proprietors, workers’ compensation insurance isn’t offered automatically as they are considered self-employed. Workers not classified as employees of a company receive a 1099 tax form at the end of the year instead of a W-2.

Self-Employed Workers’ Compensation

While it may not make sense for self-employed workers in certain fields to get workers’ compensation, especially those in the creative field or digital landscape, like programmers or coders, it can still be beneficial for employers to add this.

When independent contractors not covered by this kind of insurance are injured in any capacity while performing their tasks, they may either sue for injuries or resolve the matter during arbitration. Either way, they can have something against their employer. Depending on the injury risks, the contracting company may end up deciding that the potential cost of injury lawsuits is not worth the risk of hiring IC’s.

On the other hand, self-employed workers may decide that the cost of workers’ comp insurance is worth the overall price. This can be true in areas of work like construction and other industries with a higher risk of injury. General contractors, for example, usually are liable for injuries that are experienced by subcontractors they hire out. Premiums are usually charged for any uninsured subcontractors.

Sole Proprietors

For sole proprietors who don’t work with companies or hire their own subcontractors, they may still benefit from purchasing workers’ compensation. Someone who works alone who gets injured on the job, whether it’s carpal tunnel syndrome or breaking a bone, may have to take time off from work following an injury. Even if they have medical insurance, time away from work will bite into their personal finances and could have long-term impacts.

About InsureMyWorkComp

InsureMyWorkComp is a digital brokerage that helps clients find the right workers’ compensation solution for their business needs. Unlike other online platforms, we will help you to work with an agent who can provide you the right solution for your risk profile. Our staff has over 50 years of workers’ compensation underwriting and sales experience, and we are confident that we will provide you the support that you need. For more information or to get a quote, contact us today at (855) 340-9138.