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Which Businesses Need Workers Comp Insurance? Important Info You Need to Know

7-minute read

Emily Thompson

Emily Thompson

10 March 2022

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If you’re self-employed, you may be wondering if you need workers comp insurance. This important type of business insurance often is required as soon as you hire your first employee. But do you need it if you’re a freelancer? How about if you hire contractors? What about remote employees in other states?

We have answers to your common questions right here. If you’re ready to get the scoop on workers compensation, let’s get started.

What is Workers Compensation Insurance?

You may be tempted to skip out on buying workers comp insurance, especially if you learn it isn’t required by law. But heed this warning: Workers comp insurance for self-employed can be really important. It’s designed to help protect your business if there’s an accident or injury at your workplace.

Workers comp can help cover:

  • Medical bills, tests, and treatments. Without coverage, you may be on the hook to pay for costly healthcare bills.
  • Ambulance rides and emergency room visits. Just think about the cost of one ambulance ride.
  • Physical therapy and ongoing care. Depending on the injury, physical therapy visits can last months or even years.
  • A portion of an employee’s lost wages. Workers compensation can help cover the salary of an employee who is out of work while recovering.
  • Return-to-work job training. If an employee can no longer do their regular job due to an injury, workers compensation can help pay for training that places them in a new role.
  • Death benefits for loved ones. Unfortunately, tragic accidents can happen. If an employee passes away and it’s related to their job, workers compensation can reimburse loved ones for the cost of a funeral, burial, and other end-of-life expenses.

Without workers comp, you may be putting your business at risk. If an employee gets seriously injured or sick while working, they can sue you for lost wages, medical expenses, and much more. Without workers comp insurance, you may be held liable for these costs — plus any legal fees related to a lawsuit.

Not only that, but if you live in a state where workers comp is legally required, continuing to work without a policy could cost you a hefty fine. Currently, Texas is the only U.S. state that doesn’t require employers to carry workers compensation insurance if they hire workers.

If you live in any other state and hire someone, you likely need a policy. But that policy can vary greatly, depending on your business’s location. For example, some states only require an insurance policy if you’ve hired two or more employees. Meanwhile, other states require coverage at three or four employees.

Overall, it’s best to review your state’s requirements before you start the hiring process. If you have questions, talk to one of Simply Business’s insurance professionals by calling 855-930-2844. We can walk you through the guidelines in your state.

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Why Contractors Need Workers Compensation Insurance

You already know that if you hire full-time employees, you need workers comp insurance. But what if you hire contractors? These are independent workers who perform specific jobs for you but aren’t your official employees.

Here’s the deal: Workers comp insurance for contractors is important too, so you should make sure they’re insured before you begin a new job together. Otherwise, you could put your business at financial risk. Many business owners require proof of insurance before signing a contract and starting a job.

Depending on your industry, your business may be at higher risk for accidents involving contractors. Take, for example, the construction industry. Sadly, 20% of all worker fatalities happen in the construction industry — and that doesn’t even include the numerous injuries that occur. If you own a construction business, it’s important to ensure you have workers compensation for your own employees and any contractors who work with you.

Are you an independent contractor? Then you’ll probably need to purchase your own workers comp coverage. Don’t assume that your client or employer will protect you with their insurance, because in many cases, they don’t. Instead, have a conversation up front about insurance. Before signing a new contract with an employer, ask:

  • Would you like to see proof of insurance?
  • Do you require a specific amount of coverage before we work together?
  • What is your process if there’s an accident or injury on the job?

If you already have your own workers comp coverage, it’s a selling point. Many business owners prefer to hire contractors who are insured. After all, it’s safer for them to do business with someone who is financially protected versus workers who are uninsured. Otherwise, they’re leaving their business open to potential lawsuits.

If you’re looking for workers comp insurance for contractors, give us a call at 855-930-2844. We can help break down the details of how this insurance can help cover you.

Workers Compensation Insurance for Subcontractors

Often, independent contractors will employ temporary workers too. Called subcontractors, these are workers who are hired for a specific job, but are not your employees. As we mentioned, every state has different requirements for workers compensation insurance. But, in general, you aren’t required to offer coverage to subcontractors.

Instead, many business owners and independent contractors require their subcontractors to purchase their own insurance. This can help alleviate their own risk of a lawsuit if there’s an accident or injury, and it can help financially protect subcontractors as well.

Remember, purchasing subcontractors workers comp is especially important in some high-risk industries. For example, subcontractors in the education and healthcare sectors may be more likely to get injured or sick on the job. In 2020, there were over 455,000 cases of nonfatal injuries among education and healthcare workers. Meanwhile, if you’re a freelance designer working for a marketing consultant as a subcontractor, you may be at a lower risk. It all depends on what you do, if you travel, and how likely you are to be exposed to accidents, injuries, and illnesses.

At Simply Business, we can help you understand the level of risk in your job, whether you’re a subcontractor or a business owner who employs independent workers. If you’re looking to purchase subcontractors workers comp, talk to one of our insurance professionals. We’re here to guide you.

Workers Compensation Insurance & Remote Employees

Here’s a good question. What if you own a company that employs workers in multiple states? Considering that every state has different workers compensation guidelines, how do you purchase affordable coverage?

Honestly, things can get a little hairy when you have remote workers in different states. In general, business owners are required to offer workers compensation according to the states’ guidelines where their employees do the bulk of their work.

For example, let’s say you have a regional sales representative in Missouri. You would need to offer this employee workers compensation according to the Missouri guidelines.

Sure, that’s fine, until you employ multiple workers across many different states. If this happens, you’ll probably need to offer different workers comp insurance for your remote employees — with various coverage levels too. It can get a little confusing, to say the least.

Fortunately, at Simply Business, we’re here to help you sort through the different guidelines and find policies that will cover your remote workers.

What if you have a fully-remote employee who wants to do his work on the road while sightseeing across the country? How can you cover this worker if he’s in multiple locations?

Our advice: It’s important to know up front where your remote employee is traveling so you can evaluate how his trip impacts your business. You may even want to put a company policy in place so you can agree on remote work circumstances.

The past few years, remote work has become increasingly popular among workers. Today’s employees enjoy the freedom and flexibility remote work offers, and many want to travel while on the job. In 2020, 45% of all full-time workers worked remotely either full time or part of their work week. If you choose to allow remote work at your company, consider how it will affect your company’s workers compensation insurance, as well as other benefits, including health insurance.

Whether you’re looking to buy one workers comp policy for remote employees or you need to buy several different policies that cover workers in multiple states, give a member of our team a call. We can help you understand requirements across states and recommend ways to save on coverage.

Self-Employed Workers Comp: Do I Need It?

As a rule of thumb, if you’re a sole proprietor with no employees, contractors, or subcontractors, you’re likely not required by law to purchase workers compensation insurance, but still may benefit from having it.

For example, let’s say you’re a freelance graphic designer and work independently from your home office. You’re not at high risk for an injury on the job, and your clients don’t require insurance before hiring you. Chances are, you can skip buying coverage.

If you have just one or two employees, and your state doesn’t require coverage, then you may be able to go without coverage as well. But remember, you should always evaluate your employees’ risk of getting injured or sick on the job. If you’re uninsured, and there’s an injury, you may be responsible for the associated costs.

Employers with more than a few employees and workers in high-risk industries should probably purchase workers comp insurance right away. Insurance can help financially protect their businesses should a claim arise — and it’s good for their employees too.

The same rule of thumb applies to contractors and subcontractors. For these workers, proof of insurance may be required even before getting hired.

Finally, self-employed individuals with remote workers should take time to organize their benefits and create a solid remote work policy. Despite its popularity, remote work can make it challenging for companies to manage multiple workers compensation policies across state borders.

Be thoughtful about your company’s remote work plan first before you say, “yes” to employees who want to travel on the job.

Final word: Before deciding on workers comp for self-employed workers, we recommend taking the following steps:

  1. Research your state’s mandatory guidelines. Find out how many employees you need to have before coverage is required. Then learn about recommended and required coverage levels. It’s also helpful to brush up on your state’s process for submitting and following up with claims.
  2. Evaluate the level of risk in your industry. Truly consider how likely it is for you or your employees to get injured or sick on the job. And remember, many industries require coverage anyway. A Simply Business insurance professional also can help you determine your risk. Give us a call, and we’ll help guide you.
  3. Don’t forget about contractors, subcontractors, and remote workers. It’s critical to employ insured workers, otherwise you could put your business at risk. Before signing a contract with an independent worker, ask them to provide proof of workers compensation insurance. You won’t regret it.

Workers comp for self-employed individuals is very valuable, and in some cases, required by law. If you’re ready to buy a policy today, or if you’re learning about what coverage you may need, speak with a Simply Business insurance professional. We can help you understand coverage requirements and find a policy that meets the needs of your business and its budget. Just call 855-930-2844 today. We’re here for you.

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Emily Thompson

Written by

Emily Thompson

I earned a B.A. in Journalism from the University of Wisconsin at Madison (go Bucky). After realizing my first job might involve carrying a police scanner at 2 am in pursuit of “newsworthy” crimes, I decided I was better suited for freelance blogging and marketing writing. Since 2010, I’ve owned my freelance writing business, EST Creative. When I’m not penning, doodling ideas, or chatting with clients, you’ll find me hiking with my husband, baby boy, and 2 mischievous mutts.

Emily writes on a number of topics such as entrepreneurship, small business networking, and budgeting.

This content is for general, informational purposes only and is not intended to provide legal, tax, accounting, or financial advice. Please obtain expert advice from industry specific professionals who may better understand your business’s needs. Read our full disclaimer

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