{"id":2003,"date":"2021-03-04T11:39:14","date_gmt":"2021-03-04T11:39:14","guid":{"rendered":"https:\/\/www.insurancebee.com\/blog\/?p=2003"},"modified":"2023-02-08T09:55:25","modified_gmt":"2023-02-08T09:55:25","slug":"workers-compensation-for-contractors-subcontractors-who-needs-it","status":"publish","type":"post","link":"https:\/\/www.insurancebee.com\/blog\/workers-compensation-for-contractors-subcontractors-who-needs-it","title":{"rendered":"Workers\u2019 compensation for contractors & subcontractors: who needs it?"},"content":{"rendered":"
\n
\"Workers'<\/figure>\n<\/div>\n\n\n

For contractors and subcontractors, workers\u2019 compensation rules are different. But before we dig down into the detail of who needs what, let\u2019s be clear on the differences between the two terms.<\/p>\n\n\n\n

What\u2019s the difference between a contractor and a sub-contractor?
<\/h2>\n\n\n\n

Contractors<\/h3>\n\n\n\n


If a client hires you to work on a specific project, or on a freelance basis, you\u2019re a contractor. The clue\u2019s in the name \u2013 you and your client usually sign a contract setting out the terms of the arrangement.<\/p>\n\n\n\n


Your client pays you for your service and labor. And you might sometimes provide the equipment needed to get the job done. But you\u2019re not on your client\u2019s payroll and you\u2019re free to take on projects for other clients.<\/p>\n\n\n\n


Subcontractors<\/h3>\n\n\n\n


As a contractor, if you need help, or specialized skills, to finish a project for a client, you might take on a subcontractor.<\/p>\n\n\n\n


Subcontractors might be an individual or a company. Either way, they report to you, not your client. You oversee their work and pay them when their specific job is finished.<\/p>\n\n\n\n


What is workers\u2019 compensation insurance?<\/h2>\n\n\n\n


Workers\u2019 compensation insurance protects employers from the cost of employee claims for workplace injury or illness.<\/p>\n\n\n\n


A workers\u2019 comp policy typically covers:<\/p>\n\n\n\n


\u2022 Accidents on-site or in the workplace (including loss of limbs)
\u2022 Injuries caused by repetitive motion (such as carpal tunnel syndrome)
\u2022 Medical bills
\u2022 Lost wages
\u2022 Death and related costs.<\/p>\n\n\n\n


It can also protect you from the cost of a lawsuit \u2013 no matter who\u2019s at fault. And as these currently average around $40,000<\/a>, it\u2019s a policy worth having.<\/p>\n\n\n\n

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

Do independent contractors need workers\u2019 comp?<\/h2>\n\n\n\n

Self-employed, independent contractors aren\u2019t usually required to have workers\u2019 comp insurance. Unless you have any employees, of course. If you do, workers\u2019 comp insurance is a requirement in most states.<\/p>\n\n\n\n


Check with your state\u2019s Department of Labor, because the exact requirements vary and penalties can be severe.<\/p>\n\n\n\n


But there are other reasons you might want contractors\u2019 workers\u2019 compensation insurance.<\/p>\n\n\n\n


To meet the conditions of your contract<\/h3>\n\n\n\n


As a contractor, your clients aren\u2019t usually required to carry workers\u2019 comp for you: you\u2019re not on their payroll, so you\u2019re not classed as an employee.
<\/p>\n\n\n\n

However, some clients may expect you to have your own workers\u2019 comp policy and ask to see your certificate of insurance before they\u2019ll sign a contract with you. That\u2019s to protect themselves if you\u2019re injured while working for them and try to claim compensation.<\/p>\n\n\n\n


To safeguard your income
<\/h3>\n\n\n\n

You may already have health insurance. But your policy may not pay out for a work-related accident or illness. That\u2019s when a workers\u2019 comp policy comes into its own.<\/p>\n\n\n\n


If you have an accident at work, it covers your medical bills. And if the accident stops you working, it repays your lost income, too.<\/p>\n\n\n\n

If you hire subcontractors<\/h3>\n\n\n\n

If you have no employees and only hire subcontractors you may still be required to have workers\u2019 comp. It depends on they way your state classifies workers as employees.<\/p>\n\n\n\n


Even if your subcontractors have their own workers\u2019 comp policy, your state might still require you to carry workers\u2019 compensation insurance for them. It\u2019s best to check with your Department of Labor.<\/p>\n\n\n\n

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

Do subcontractors need workers\u2019 comp?<\/h2>\n\n\n\n

As a subcontractor, you\u2019re not an employee, you\u2019re a separate entity, independent of the contractor, or firm, who hires you. Because you\u2019re not an employee, they don\u2019t need to carry workers\u2019 comp coverage for you.
<\/p>\n\n\n\n

But to protect themselves in case you try to claim against them, most businesses will write a workers\u2019 compensation insurance requirement into your contract. And they’ll probably ask you to prove it by showing a valid Certificate of Insurance. <\/p>\n\n\n\n


And of course, if you\u2019re a subcontractor with employees, most states require you to have workers\u2019 comp anyway.<\/p>\n\n\n\n

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

For more information, on workers’ compensation for contractors and subcontractors, read our blog post on workers\u2019 comp insurance for the self-employed.<\/a><\/p>\n\n\n\n


And you\u2019ll find more on the other types of business insurance contractors<\/a> and subcontractors<\/a> need on our website. But if you\u2019d like to talk it through with us, please call. We\u2019re always happy to help.<\/p>\n","protected":false},"excerpt":{"rendered":"

For contractors and subcontractors, workers\u2019 compensation rules are different. But before we dig down into the detail of who needs what, let\u2019s be clear on the differences between the two terms. What\u2019s the difference between a contractor and a sub-contractor? … 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":[72,88,89],"class_list":["post-2003","post","type-post","status-publish","format-standard","hentry","category-workers-compensation-insurance","tag-independent-contractors","tag-self-employed","tag-subcontractors"],"yoast_head":"\r\nWorkers' compensation for contractors and subcontractors: who needs it<\/title>\r\n<meta name=\"description\" content=\"Rules on workers' compensation for contractors and subcontractors are different. 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