Workers' comp insurance for 1099 contractors

Most states don’t require companies to provide workers’ compensation coverage for independent contractors. Still, many freelancers and subcontractors choose to carry it themselves since it can cover medical costs from work-related injuries that health insurance often excludes.

What is the difference between a 1099 contractor and an employee?

Despite the common phrase “1099 employee,” the Internal Revenue Service (IRS) recognizes only two categories: employees and independent contractors.

Employees: Full-time and part-time workers paid regular wages, work under their employer’s direction, and often receive benefits such as health insurance or retirement contributions. Employers must also withhold payroll taxes.
1099 contractors: Freelancers, gig workers, and subcontractors who operate independently. Clients may outline what needs to be done, but contractors control how the work gets completed, often using their own tools and resources.

Do 1099 contractors need workers' comp?

In most states, workers' compensation laws don't require businesses to provide workers’ comp for independent contractors or 1099 contractors. However, sole proprietors in higher-risk industries (like a construction industry general contractor) may need to carry it themselves. Some state laws, such as those in California, even mandate coverage for specific trades regardless of whether you hire employees.

Workers’ compensation also protects business owners. If an injured worker sues over a job-related injury, an employer’s workers’ compensation policy typically covers the claim through the included employer's liability insurance coverage.

Find workers' comp requirements in your state

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Can independent contractors purchase workers' compensation insurance for themselves?

While 1099 contractors aren’t legally required to carry workers’ compensation coverage, many opt to purchase their own workers' compensation insurance policy and pay the insurance premiums to gain access to its wage replacement and medical care benefits.

Even if it’s not required, workers' compensation benefits include:

Medical protection: Pays for work-related injury medical expenses that standard health insurance might exclude.
Income replacement: Helps cover lost wages if you can’t work due to injury.
Contract eligibility: Some clients require proof of workers’ comp before awarding written contract jobs.

How to save money on workers' compensation insurance for 1099 contractors

If you’re self-employed in a low-risk field but need proof of workers’ comp coverage to secure contracts, a workers’ comp ghost policy could be a cost-effective option. This type of policy provides a certificate of insurance but doesn't include coverage for workers' compensation claims, medical bills, or lost wages.

For contractors who want full protection, paying premiums annually instead of monthly can often reduce overall costs, since many insurers offer discounts for upfront payment.

If you want something in between, a minimum premium workers’ comp policy may be a good fit. This is the lowest level of coverage an insurance company will issue that still provides actual benefits, offering a balance between affordability and protection.

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