Business owners purchase Workers' Compensation Insurance to provide coverage for employees in case they experience occupational injuries. Most of the time, employers are required by state law to have this policy once they hire employees.
IT sole proprietors without employees are usually exempt from these requirements. But that doesn't necessarily mean they should skip this coverage. It might be a good idea for IT professionals to carry Workers' Compensation even if they don't have employees when:
- They can't afford to pay for their occupational injuries.
- They can't cover lost wages if an occupational injury keeps them from work.
- A client contract requires it.
1. If You Can't Afford Work Injury Medical Expenses
IT professionals don't face the same hazardous working conditions as, say, a commercial fisherman or construction worker. But that doesn't mean your job is without risk. For example, you could throw your back out while picking up a box full of server components, or develop carpal tunnel syndrome.
If you do experience a work injury or illness, Workers' Comp can help pay for:
- Medical bills.
- Ongoing rehabilitation costs, like physical therapy.
- Death benefits to your family if the injury is fatal.
Without Workers' Compensation Insurance, you could be forced to pay these costs yourself. That's because most work injuries and illnesses are excluded from health insurance coverage. (Related reading: "2 Most Common Workplace Injuries for Technology Businesses.")
2. If You'd Need Help Replacing Your Lost Income
If a work injury is serious enough to keep you out of work, you have to contend with lost income, too. This is especially true if you are a solopreneur: if you're not working, your business likely isn't generating revenue.
Fortunately, Workers' Comp can pay for partial lost wages when you are out of commission because of a work illness or injury. For a small business owner, that can be the difference between a business staying afloat and closing.
3. If Your Client Contracts Require It
Workers' Comp laws vary from state to state. However, in some cases, a subcontractor without their own Workers' Comp coverage may be classified as an employee. If that happens, the client could be penalized for not covering the subcontractor with their Workers' Comp policy. For that reason, some businesses may not want to hire you unless you can show that you have your own Workers' Comp coverage.
For more information on Worker's Comp, read "Top 10 Workers’ Comp Insurance Questions."