Contractors Guide to Workers Compensation Insurance
Workers compensation insurance is something that every U.S. state requires employers to purchase for employees, with very few exceptions. It is also something that independent contractors and self-employed professionals can purchase for themselves.
Some states make companies responsible for verifying that contractors have 1099 workers comp coverage or accept responsibility for injuries, accidents, and illnesses contract employees received while working on their behalf.
While self-employed professionals and contractors may not be required by law to have coverage, check your state’s laws to be certain. It is still a good idea to consider it regardless. Some individuals and companies may even require contractors to have workers comp coverage even if it’s not required by the state.
What is Workers Compensation Insurance?
Workers compensation insurance is a specialized type of insurance most employers are required, by law, to purchase for their employees. This type of insurance protection is very specific and limited in scope. It offers protection for the following:
- - Medical expenses related to accidents, injuries, or illnesses occurring while workers are on the job.
- - Wage benefits for employees who must miss work while receiving medical treatment and recovering from injuries and illnesses occurring on the job.
- - Rehabilitative treatment expenses stemming from on-the-job injuries, accidents, and illnesses.
- - Death benefits payable to families if the injuries or illness experienced on the job results in the death of the employee.
Businesses enjoy many benefits from this arrangement that improves employee morale, reduces absenteeism, and keeps companies on their toes when it comes to promoting a safe work environment, which in turn reduces the number of accidents and injuries occurring in the workplace.
Who Needs Workers Compensation Insurance?
There are two main groups who need workers’ compensation insurance:
1) Employers who hire people to work for their businesses, with few exceptions, need workers compensation insurance. This insurance is required by law in most U.S. states, and each state has different requirements for the level of protection offered and specific types of WCI coverage required.
Even if you aren’t required by law to provide workers comp to your employees, it is often in your best interest to offer protection to the men and women who work for you. Part of workers compensation protection extends to business owners. If your injured employees sue your company, WCI covers the cost of your legal fees, which can be quite costly, associated with the lawsuit.
2) Independent contractor, self-employed, and sole proprietors. If you are classified as one of these, you may have a greater need for WCI because you don’t have employer-provided protection.
If your state requires workers compensation insurance for you, as a contractor, or the people who work for you, whether they are employees or subcontractors, the penalties of failing to provide it can be substantial.
Even without an injury resulting in a lawsuit, which can have devastating repercussions for your business, the fines assessed by the state for merely failing to provide the required coverage are substantial.
Some states, urging contractors and businesses to take the need for workers compensation coverage seriously, impose multiple penalties for failing to comply that may include any combination of the following:
- - Civil fines
- - Criminal fines
- - Imprisonment
Getting your WCI coverage right from the start is a big deal for contractors, just as it is for other businesses.
Reasons You Should Purchase Worker Compensation as a Self-Employed Contractor or Sole Proprietor:
1) A Contract Requires Workers’ Compensation Coverage
Some businesses necessitate anyone performing work or performing services for their company to carry their own insurance policies, including independent contractor workers' compensation insurance. This policy limits the company's liability and the chances that the business will be financially on the hook if a contractor is injured on the job.
2) Workers’ Compensation Can Protect Your Income
Many health insurance policies exclude coverage for work-related injuries and illnesses. Purchasing workers' comp insurance for independent contractors ensures that if you're injured on-the-job, your medical bills will be covered according to the policy terms. Workers' comp can also help replace lost wages while you're unable to work.
Do 1099 Employees Need Workers Comp?
The short answer is yes. Accidents happen in the workplace all the time. Accidents, injuries, and illnesses occur that can render you unable to work while creating enormous medical bills for you to pay. Think of all the risks you may be exposed to in the course of the day:
- - Ladders
- - Heights
- - Chemicals
- - Asbestos
- - Mold and Mildew
- - Equipment and Tools
Beyond that, some states require contractors who have employees working for them to provide workers compensation insurance. It is essential to know the laws in your state, as they apply to contractors, to be sure whether you need 1099 workers comp for yourself or your employees, or not.
Regardless of whether it is required by law, though, 1099 workers comp is a good idea for you to have in all industries, but especially high-risk industries like construction.
Do I Need Workers Compensation Insurance for Independent Contractors?
Some states do require independent contractors to purchase workers compensation insurance. This protects you if something happens to you while working on a job and is a smart thing to have. Also, some contracts are only available to you if you have workers compensation insurance.
In fact, many of the more lucrative contracts require all contractors and subcontractors to have workers comp for independent contractors, meaning you’ll miss out on a lot of potential work without it.
This means that if you are committed to a long-term career as a contractor, workers compensation is key to protecting your most important instrument for your career – YOU!
With an average cost of $36,551 per claim, workers compensation is something you simply can’t afford to go without. It only takes one injury on the job to make up for years, even decades, of paying for workers compensation coverage.
Plus, the wage protection WCI provides is worth its weight in gold if you face a lengthy recovery.
What Does Workers Compensation Insurance Exclude?
While workers comp offers many benefits, some things are explicitly excluded from the protection it provides, such as:
- - Injuries that occur outside of the workplace.
- - Injuries that are intentional in nature.
- - Injuries occurring during your commute to or from work.
- - Injuries related to alcohol or drug use.
Contact Coverage Specialists for Your Workers Compensation Insurance Needs
Accidents and injuries happen on-the-job all the time. It is essential to protect yourself with worker’s compensation coverage so that your medical expenses and income are protected while you recover from your injury. Here at Coverage Specialists, we can help you get the right worker’s compensation coverage for contractors and more. Contact us today to learn more.