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4 Scenarios When an IT Business Might Need Workers’ Comp Coverage

When it comes to Workers’ Compensation Insurance, there’s no one-size-fits-all approach you can take as a small IT business owner. You may run a one-person operation, employ only freelancers, or rely on a mix of employees and subcontractors. Plus, each state has a unique set of Workers’ Comp laws. No matter what kind of work you do, it can be tricky to figure out whether you need coverage, and if you do, who should be included on your policy.

To help make sense of it all, here’s a look at four common IT business types and the potential Workers’ Compensation needs of each.

Business Type #1: Solo Entrepreneur

If you own an IT business and work solo, you may think you don’t need a Workers’ Comp policy. But what if you get injured? Yes, IT is not the most high-risk occupation, but accidents do happen. For example…

  • You trip over a bundle of cords in your messy home office and break your arm.
  • While driving to a client’s office, you get into a serious car accident.
  • While visiting a client, you break your foot after kicking the vending machine to get a dangling bag of Funyuns.

If you aren’t able to work due to an injury, have you considered how you’ll get paid? If you have Workers’ Comp coverage, not only should it cover your medical expenses, it can also help replace your lost income. Check out our blog post “Overview of Workers’ Compensation Insurance for Technology Businesses” if you need a primer on the basics of how Workers’ Compensation works.

Business Type #2: Co-owner of an IT Business with a Partner (No Employees)

Like a one-person business, you and your partner will benefit from Workers’ Comp coverage in case one of you is injured on the job. An unexpected injury could impact the ability of your business to meet client needs, complete projects, and get paid.

Another reason to have Workers’ Comp coverage? Your clients might require it. Once someone is injured on the job, you never know who could be on the hook for liability. If you have Workers’ Compensation Insurance, your clients can feel more confident it won’t be them. Read the article “Common Client Requirements for Workers’ Comp” for a better idea of what you might encounter in client contracts.

Business Type #3: Small IT Business Owner with Subcontractors

Maybe you handle the majority of work on your own, but occasionally, you need to hire a few subcontractors for specialized work. You may be legally required by your state’s laws to provide Workers’ Comp coverage for everyone you hire for a job – even if they aren’t technically an employee.

“It’s more common when you’re working with employees, even part-time employees or freelance employees, that you would be dealing with Workers’ Compensation,” says digital entertainment and corporate finance lawyer Bob Zeglarski (@BizLaywer), founder of (@CutwaterLaw).

If you regularly work with subcontractors, check state regulations to find out whether you need to provide coverage. You can also require that any contractor you hire has their own Workers’ Compensation Insurance.

Business Type #4: IT Business with at Least One Employee

This one is straightforward, right? Your business has employees, so you need Workers’ Comp, right? Not necessarily.

Workers’ Compensation is regulated by state law, so the requirements are dependent on where your business is based. For example…

  • In Florida, the cutoff is four or more employees, according to Ken Hesser (@kenhesser), partner with central Florida law firm . If your business is based in Florida and you only have three employees, you could get coverage, but it’s not mandatory.
  • In Texas, Workers’ Comp is optional for any business, says Michael Carroll (@InsuringLawyer), president of . “However, the vast majority do carry Worker’s Comp for the obvious reason that if their employee is hurt on the job, they don’t want to be sued,” he says.

Not convinced you need it? Providing Workers’ Compensation coverage also reduces an employee’s ability to sue your business.

“Workers’ Comp covers employee medical bills and lost wages if they are hurt on the job,” Zeglarski says. “In exchange for that benefit, the employee generally has a limited right to sue their employer in connection with that loss.”

How Do You Know whether You Need Workers’ Compensation Coverage?

It’s hard to imagine a scenario where Worker’s Compensation Insurance wouldn’t benefit your IT business. But maybe you’re more concerned about knowing exactly when you need to have it and what type of workers need to be covered. Choose your state in the dropdown menu below to read about Workers’ Comp laws specific to your state.