Do I need workers' comp insurance if I have no employees?
What is workers’ compensation insurance coverage?
Workers' compensation insurance helps cover medical costs and lost wages if an employee is injured or falls ill while at work. This policy is typically purchased through an insurance carrier or a state fund.
State workers' compensation laws determine the amount of coverage your small business will need. Almost every state (except Texas and South Dakota) requires workers' compensation after a certain number of employees are hired.
Full-time and part-time employees, volunteers, corporate officers, and even family members who perform work for your business may require coverage depending on your individual state laws.
Workers' comp typically covers:
- Emergency treatment and medical bills
- Ongoing medical costs, such as physical therapy or necessary medications
- Wages lost while off work for medical care and disability benefits
- Potential legal expenses if an employee sues for work-related injuries or illnesses.
A failure to provide workers' comp based on your state requirements could result in fines, a misdemeanor charge, and other consequences for you and your business. Additionally, business owners may be held directly financially responsible for injury-related expenses for uncovered employees.
When do you need workers' comp if you have no employees?
While the majority of small businesses won't be required to carry workers' comp if they don't have employees, there are some situations where it might be necessary.
For example, general contractors and subcontractors in certain states, such as California, may be required to carry workers' comp to obtain a government contract.
Additionally, clients may require their contractors to carry workers' comp to sign a contract, even when the state does not mandate it in order to reduce their risk and liability.
Find workers' comp requirements in your state
Do sole proprietors need workers' comp coverage?
Generally speaking, sole proprietors and independent contractors are not required to carry workers' compensation if they don't have any employees.
It's important to check with your local laws and regulations to ensure that your industry doesn't have special requirements for sole proprietors to carry workers' comp in order to perform certain types of work or sign specific agreements, such as gov. contracts.
If you hire subcontractors, do you need workers’ comp for them?
In some states, subcontractors are considered employees and may need to be covered by workers' comp.
Failing to provide required workers' comp for subcontractors in states like Nevada could result in heavy penalties and fines should your subcontractor become injured on the job.
Why you should still consider workers' comp with no employees
Even when it's not required by state law, workers' comp is often an important policy for self-employed sole proprietors to carry.
Generally speaking, personal health insurance will not cover work-related injuries. So if you're injured or fall ill while working, your own insurance through a private healthcare provider will likely deny your claim.
Higher-risk occupations, such as electricians and carpenters, should strongly consider this policy to protect themselves from common workplace injuries.
Many construction industry contractors and limited liability companies (LLCs) will obtain a workers' compensation insurance policy because of the inherent risk, but even lower-risk industries carry risk and should also consider coverage.
For example, an IT consultant who develops carpal tunnel could find themselves out of work for a period of time, which would be covered by their workers' compensation benefits.
Additionally, you could be out of work for a period of time while you recover. Workers' comp would help cover your lost wages until you can get back to work.
How to get affordable workers’ compensation coverage for yourself
Workers' compensation insurance usually isn't expensive, and many small business owners take on the cost because it outweighs the risk of becoming injured on the job without coverage.
However, it's also possible for small business owners to keep prices as low as possible through a few tried-and-true methods.
To keep your workers' comp costs low, consider the following:
- Establish safety measures. The right risk management protocols can prevent injured worker claims and the medical expenses that come with accidents and injuries for you or anyone you employ.
- Correctly classify employees and subcontractors. Ensuring that you and your employees are classified properly can ensure that your business is paying the right amount of coverage and not over- or underpaying.
- Consider minimum premium policies. pay-as-you-go workers' comp is a popular option that determines your insurance rates based on actual payroll and not projected estimates. A workers' comp ghost policy is also available if you need workers' comp to fulfill requirements or contract stipulations, but don't actually anticipate needing coverage (though this is a risky option and not legal in all states).
Find workers' compensation insurance for your small business
Even if you don't have employees, finding the right workers' comp policy is important for many small businesses. You can compare workers' comp insurance quotes from the U.S.'s leading insurance companies with TechInsurance's easy online application.
Our licensed insurance agents are available to answer any questions you might have about your business insurance needs.
After you find the right business insurance and start your policy, you'll receive a certificate of insurance (COI), typically within 24 hours.
