If you don’t have employees, you may not need to carry workers’ compensation insurance from a legal standpoint. That said, you may still want to invest in a workers’ comp policy for yourself or subcontractors, or, you may need to have a policy if another business you work with requires it. Here are four different scenarios to consider when evaluating whether you should purchase workers’ compensation insurance:
1. You are a small business owner or sole proprietor without employees or contractors
Once again, in this case you probably won’t need worker’s compensation coverage. However, you may be required to complete a sole proprietor workers’ compensation exemption form, get it notarized, and pay a fee. You should—as always— check the requirements of your state. Please review the Department of Labor’s map with state workers’ comp agency contacts.
2. A business wants to use you as a contractor but requires you to have workers’ compensation coverage
Some companies will not use you as a contractor if you are not covered by your own workers’ compensation insurance policy. It does not make sense for them to take on the risk of using an uninsured contractor because if you’re injured, they’ll have to pay out of pocket and can also be sued. Businesses are legally permitted to ask you to show a certificate of insurance (COI) if you want to contract with them.
3. You want to be covered by insurance in case you’re injured while working
Even if you are a sole proprietor or small business owner working alone, you might choose to buy workers’ comp coverage for yourself simply because it just makes good sense, especially if your work involves high-risk activities like construction. If you are injured or become ill while performing your work, you’ll be covered by your own workers’ comp policy. That way, you won’t have to try to get your personal health insurance company to cover your illness or injury—something most health insurers won’t do. Health insurance companies also won’t provide partial reimbursement for lost wages the way many workers’ compensation policies will do.
4. You are a small business owner or sole proprietor who uses one or more contractors
If you use an independent contractor, subcontractor, or leased employee to perform work for you, even part-time, you may be required to get workers’ comp coverage (again, refer to your state’s laws). Keep in mind though that if you’re not required to have coverage and choose not to get it, you can be held liable for injuries or illnesses that happen on the job. Best practice is to have coverage for yourself and anyone who works for you or to be sure they show proof of coverage for themselves.