{"id":1974,"date":"2021-02-25T10:13:14","date_gmt":"2021-02-25T10:13:14","guid":{"rendered":"https:\/\/www.insurancebee.com\/blog\/?p=1974"},"modified":"2023-02-08T09:55:33","modified_gmt":"2023-02-08T09:55:33","slug":"sole-proprietors-workers-compensation-insurance","status":"publish","type":"post","link":"https:\/\/www.insurancebee.com\/blog\/sole-proprietors-workers-compensation-insurance","title":{"rendered":"Why sole proprietors need workers\u2019 compensation insurance"},"content":{"rendered":"\n
\"illustration<\/figure>\n\n\n\n

Do sole proprietors need workers\u2019 compensation insurance<\/a>? If you have any employees, the answer\u2019s \u2018yes\u2019.<\/p>\n\n\n\n


But there are a couple of other reasons you might want a workers\u2019 comp policy in place. We\u2019ll come to those. First, let\u2019s talk about what\u2019s legally required.<\/p>\n\n\n\n

State requirements for sole proprietors workers\u2019 comp<\/strong>ensation<\/h2>\n\n\n\n


You could be a freelancer, working from home, or an independent contractor working on-site. If you receive a Form 1099 from the people who pay you, you\u2019re likely a sole proprietor.<\/p>\n\n\n\n


Sole proprietors are typically thought of as lone wolves. However, a sole proprietorship is just a name for the type of business structure. It doesn\u2019t mean you don\u2019t employ anyone.<\/p>\n\n\n\n


And if you do \u2013 even if it\u2019s just one person — you need workers\u2019 comp insurance.<\/p>\n\n\n\n

<\/p>\n\n\n\n

Sole proprietor with one or more employees<\/h3>\n\n\n\n


In almost every state, for sole proprietors with employees, workers\u2019 comp insurance is a legal requirement. But as the exact rules vary from state to state and penalties can be severe, it\u2019s best to check with your state\u2019s Department of Labor.<\/p>\n\n\n\n


What\u2019s more, if you employ someone who works for you in a different state, you need to comply with that state\u2019s requirements, too.<\/p>\n\n\n\n

<\/p>\n\n\n\n

Sole proprietor with no employees<\/h3>\n\n\n\n


If you really are a lone wolf and no-one works for you, the rules for sole proprietors are the same in almost every state. You don\u2019t need workers\u2019 comp insurance. (Although, to be on the safe side, check with your state\u2019s Department of Labor.)<\/p>\n\n\n\n


But you might want to think about getting workers\u2019 comp coverage anyway. Because a workers\u2019 comp policy can pay your medical bills and lost income if you\u2019re injured in the workplace. It means your health insurance won\u2019t have to cover accidents on the job.<\/p>\n\n\n\n


Without it, you may struggle with your health insurance provider over who pays for what parts of your medical care \u2013 from ambulance rides to bandages.<\/p>\n\n\n\n

What is workers\u2019 compensation insurance and what does it cover?<\/h2>\n\n\n\n


Workers\u2019 compensation laws protect employees. If they\u2019re hurt or become ill as a result of working for you, they\u2019re entitled to benefits. Like their medical bills paid and lost earnings replaced. And if they sue, there\u2019ll be legal expenses to pay, too.<\/p>\n\n\n\n

If you don\u2019t have a workers\u2019 comp policy you\u2019ll have to foot the bill for these yourself. And with the average cost of workplace injury claims costing around $40,000 according to the NCCI<\/a>, it makes it a policy worth having.<\/p>\n\n\n\n

If an employee gets hurt, or falls ill, while working for you, workers\u2019 compensation insurance pays for medical bills, lost wages and legal expenses. What\u2019s more, no matter who\u2019s at fault, it can pay the costs of a lawsuit if your employee takes legal action.<\/p>\n\n\n\n


And if the worst happens, it provides death benefits for funeral expenses and support for the employee\u2019s family.<\/p>\n\n\n\n


Typically, a workers\u2019 compensation policy covers:
<\/p>\n\n\n\n

\u2022 Work site accidents (including injury, or loss of limbs)
\u2022 Injuries caused by repetitive motion (like carpal tunnel damage)
\u2022 Medical treatment
\u2022 Death (and related costs)
\u2022 Lost wages
\u2022 Injured employee lawsuits<\/p>\n\n\n\n

Other reasons why sole proprietorships need workers\u2019 comp insurance<\/h2>\n\n\n\n

High-risk industry<\/h3>\n\n\n\n


If you work in a high-risk industry, like construction, you may find you need workers comp to get a license or permit to work. Again, check the rules with your state\u2019s Department of Labor.<\/p>\n\n\n\n

Independent contractors<\/h3>\n\n\n\n


If you hire independent contractors to work for you \u2013 even if it\u2019s only part-time\u2014you\u2019ll probably need it too. Bear in mind that while Texas and New Jersey don\u2019t require you to have workers\u2019 comp, as an employer, you\u2019re responsible for work-related injuries. So you may want to buy a policy anyway.<\/p>\n\n\n\n

Clients may require you to have it<\/h3>\n\n\n\n


As a sole proprietor with no employees, legally you\u2019re exempt from having a workers\u2019 comp policy. However, it\u2019s not illegal for clients to require independent contractors from having a policy. Even if you work entirely on your own.
<\/p>\n\n\n\n

Basically, it\u2019s the company trying to protect itself. In case you get ill or injured while you\u2019re working for them and turn around and try to claim workers\u2019 comp benefits. But it\u2019s still a bit of a gray area. So again, check your state\u2019s requirements.<\/p>\n\n\n\n

How much does workers\u2019 compensation insurance cost?<\/h2>\n\n\n\n


The cost of a workers\u2019 comp policy varies. It depends on things like the industry you\u2019re in and the number of workplace accident\u2019s you\u2019ve had in the past.<\/p>\n\n\n\n


However, if you\u2019ve got safety precautions in place and a drug-free workforce, you could get a discounted rate.<\/p>\n\n\n\n


Read more on the types of business insurance sole proprietors need<\/a> on our website.<\/p>\n\n\n\n


And for more on workers\u2019 comp insurance, check out our blog post, what is workers\u2019 compensation insurance and why do I need it.<\/a><\/p>\n\n\n\n

But if you\u2019re not sure if you need workers\u2019 comp give us a call. We\u2019re always happy to help.<\/p>\n","protected":false},"excerpt":{"rendered":"

Do sole proprietors need workers\u2019 compensation insurance? If you have any employees, the answer\u2019s \u2018yes\u2019. But there are a couple of other reasons you might want a workers\u2019 comp policy in place. We\u2019ll come to those. First, let\u2019s talk about … Read more…<\/a><\/p>\n","protected":false},"author":16,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[60],"tags":[87,72,86],"class_list":["post-1974","post","type-post","status-publish","format-standard","hentry","category-workers-compensation-insurance","tag-business-insurance","tag-independent-contractors","tag-sole-proprietorships"],"yoast_head":"\r\nWhy sole proprietors need workers' compensation insurance<\/title>\r\n<meta name=\"description\" content=\"Do sole proprietors need workers' compensation insurance? That depends. 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