Workers’ Compensation for Self‑Employed & Independent Contractors: Do You Need It?
Introduction
Workers’ compensation insurance pays for medical expenses and lost wages when an employee suffers a work‑related injury. Many sole proprietors and independent contractors assume they’re exempt from workers’ comp requirements. In most states, including California, self‑employed business owners without employees are not required to carry this coverage. However, clients or general contractors may require it. Understanding when you need workers’ comp and how it protects you can prevent costly gaps in coverage.
Are Self‑Employed Individuals Legally Required to Buy Workers’ Comp?
Sole proprietors and independent contractors are generally not legally required to purchase workers’ compensation insurance for themselves. Workers’ comp is usually mandated only if you hire employees. Still, if you work in high‑risk fields or take subcontracting jobs, state law or a general contractor may require that you carry workers’ compensation to access job sites. Misclassifying workers as independent contractors can result in penalties.
Reasons to Consider Workers’ Comp When You’re Self‑Employed
- Contract requirements: Many general contractors require subcontractors to provide proof of workers’ compensation before they can begin a project. “Ghost policies” (minimum‑premium workers’ comp policies that exclude the owner) may satisfy this requirement.
- Health insurance exclusions: Health insurance often excludes coverage for work‑related injuries. Without workers’ comp, you may be responsible for all medical bills if you’re injured on the job.
- Lost wages: Workers’ comp can replace a portion of your income if a job‑related injury prevents you from working. Without coverage, you may have no way to pay bills while you recover.
- Legal liability: Workers’ comp policies also include employers’ liability coverage, which protects you if an injured worker sues. If you hire subcontractors or occasional helpers, coverage can safeguard your business assets.
How Workers’ Comp Works for Self‑Employed Individuals
Workers’ comp covers three main benefits:
- Medical expenses – doctor visits, hospital stays, medications and rehabilitation.
- Disability benefits – partial wage replacement if you cannot work due to an injury.
- Death benefits – financial support for dependents if an injury results in death.
Policies for sole proprietors are often less expensive because there are no employee payrolls to insure. Some insurers offer “ghost policies” that provide a certificate of insurance without covering the owner.
Determining Whether You Need Coverage
Question | If you answer “Yes”… |
Do you perform hazardous work? | Consider coverage if you work with heavy machinery or at heights. |
Do contracts require proof of workers’ comp? | You may need to buy at least a ghost policy to satisfy the requirement. |
Do you hire subcontractors or casual workers? | Hiring workers typically triggers the legal requirement. |
Would a work injury cause financial hardship? | Workers’ comp can protect you from medical bills and lost income. |
Conclusion
Self‑employed individuals aren’t usually required to carry workers’ compensation, but many choose to purchase it to satisfy contracts, cover medical bills and replace lost wages. Evaluate your industry risk, contract obligations and personal finances. If coverage is needed, shop around for a policy tailored to self‑employed workers – then quickly compare self‑employed workers’ compensation insurancequotes to ensure you get the protection you need at a competitive price.
