Do I need workers’ compensation if I have no employees?

The short answer is no.

Not in the eyes of the law at least. A small business owner with no employees is typically exempt from workers’ comp insurance in all states.

While choosing to avoid workers’ compensation might save you money in the short run, it can get pretty pricey if you end up with a work-related injury or illness and find yourself out of work for a while. That’s why it’s worth considering a workers’ comp policy for yourself.

Two primary reasons to buy workers’ comp for yourself:

1. Workers’ compensation will cover the extensive costs of work-related injuries or illnesses, but your health insurance won’t.

It’s a good idea to cover yourself because many health insurance plans will not help you out if you get hurt on the job. Check your policy to be sure, but the majority of health insurance companies do not cover medical expenses related to on-the-job injuries.

Workers’ compensation policies have no limits on medical costs. Of course, you’ll pay your deductible first (as with any insurance policy). After that, your insurance will take care of everything.

Most people in the world wouldn’t be able to get by without a steady income. And not covering yourself could be a huge gamble.

If you need to take some time off because of your illness or injury, workers’ compensation will help supplement your lost wages. Typically, the policy will reimburse about two-thirds of your typical wage.

Sure, it might not cover everything, but it can be very helpful during a desperate time. And because that money isn’t taxed, you’re actually getting a little more.

Without insurance, your business assets– as well as personal assets– could be at stake if you get hurt.

2. If you do contract work, clients/companies will often require you to have your own workers’ compensation policy.

Wondering why? In many states, if a company doesn’t have proof that a contractor has their own workers’ comp insurance policy, the hiring party is ultimately responsible if anything bad happens.

This is why many companies will require you to carry your own insurance. Often, they’ll ask you to provide a Certificate of Insurance (COI) as proof before you start a job.

If you’re an independent contractor, take a look at this: Workers’ Compensation for Independent Contractors.

To include, or not to include?

Covering yourself under workers’ comp can be a great thing– and necessary, especially if you work in a high-risk industry like construction. If you want to cover yourself, you’ll need to fill out a “coverage election” form; otherwise, you will not be protected by the policy. If you feel you don’t need the coverage, you will fill out a “coverage rejection” form. (Your insurance agent can help with the specific ins and outs of getting you covered.)

I don’t want to buy workers’ comp, but the job I’m working on requires it.

Because there’s no way to get around it, many look for inexpensive workers’ compensation options. Our partner offers workers’ comp ghost policies, which provide a COI (Certificate of Insurance), but exclude the owner from coverage.

Do I need workers’ comp if I use contractors instead of employees?

You may be legally exempt from covering contractors, leased employees, and subcontractors, depending on what state you live in. But many states make you cover anyone who does work for you.

However, it’s important to keep in mind that even if you’re legally exempt from buying workers’ compensation insurance, it doesn’t mean you won’t be held liable for someone who gets hurt or sick while working for you.

If you have subcontractors, require them to have their own insurance. You should have your own policy as well, because if your sub doesn’t have it, you could then be responsible for providing coverage for the sub’s employees.

Just because you don’t have a workers’ comp policy doesn’t mean you won’t be held liable (and potentially sued).

Because of this responsibility, it’s good practice to require subcontractors to carry their own workers’ compensation insurance. If not, you will need to invest a little extra to cover them on your own workers’ compensation policy.

Read more about subcontractor workers’ comp requirements.

Moral of the story

All in all, it’s worth it to have workers’ comp coverage, with or without employees. It’s a guarantee that you will be medically and financially protected if you get hurt or sick while working.

If you want a workers’ compensation policy, get a quote with us, and we’ll help you find the lowest rate out there.