As a sole proprietor, all the tasks and responsibilities concerning your work fall solely on your shoulders. And your shoulders alone. You are the employer, the employee, and the employed. As a master of all, you’re at times, learning as you go as we all do. Do I need worker’s compensation insurance as a sole proprietor? We anticipated your Google search and are here to help you through this inquiry. Sole proprietor workers comp is a requirement.
There are several reasons behind this necessity those which we detail down below.
Sole Proprietor Workers Comp: The 411
First things first, if you are a sole proprietor with employees, you do need workers comp as it is required by law. The specifics are dependent on your state, so you’ll need to check specific rules for your state. We’re here to cover the basics of sole proprietor workers comp and nothing state-specific.
However, before we get ahead of ourselves, what exactly is workers’ compensation? What is its relation to sole proprietorship?
Workers Compensation Defined
According to the U.S. Department of Labor, workers’ compensation is a type of insurance mandated by the government. It is a system that ensures monetary benefits to the employed. Specifically, it is insurance coverage for those who become injured or disabled during the course of their employment.
The employer benefit from having workers’ compensation is that it too covers themselves. When having workers’ comp insurance, the employee waives their right to sue the employer or any further recourse in exchange for compensation.
This compensation is laid out in the insurance plan and they vary in coverage. However, they typically cover medical fees related to injuries that occurred due to circumstances that occurred during employment.
Also, it is worth noting that workers comp is not the same as unemployment or disability insurance.
Workers’ Comp’s Relevance To Sole Proprietors
While some sole proprietors may think otherwise, there are many circumstances in which having workers’ compensation insurance is not only a requirement but also a good idea, even if you don’t have any employees.
Your Client’s May Require It
Perhaps you’ve already found yourself in the situation: you just landed a new client, and yet, you cannot just move forward in a working relationship as you do not meet the requirements the client needs in order to proceed further in a working contract.
This is quite the common scenario as many clients require who they subcontract to have workers comp insurance as a means to keep themselves covered in case of a “workplace”, or rather, on contract injury.
While clients seek out independent contractors or subcontractors to handle the jobs usually designated to hired employees as a means to avoid additional cost, they still do not want to be held liable, and therefore require subcontractors to have their own workers’ comp insurance.
If You Hire A Subcontractor, You Will Need It
The same scenario applies to you. When you hire a subcontractor, to avoid being held liable for any injuries you too should consider having workers’ comp for yourself (and ensure that the subcontractor has their own insurance just as a client will in the scenario above).
This is no different from what we described above. When working with a subcontractor, you need to have workers’ comp and so does your subcontractor just in case of a workplace injury or worse.
Moreover, non-W-2 workers can too be considered employees and you may be held liable or subject yourself to a potential lawsuit given the worst-case scenario. This is worth checking to see the details specific to your state as every state has its own regulations concerning workers’ compensation for W-2 employees.
Keeping Yourself Covered
Do not forget to keep yourself covered! As a sole proprietor, you know firsthand the risks that come with being self-employed. While there are many benefits to being your own boss, you and yourself alone are responsible for the risks that come in your line of business.
Consider this simple question: if you were to get injured on the job, could you afford to be out of work for a prolonged period of time? For many, the answer is no. So what would you do in this given scenario?
Injuries occur during the job far too often than you may think. It is in your best interest as a sole proprietor to have the means to receive the proper compensation; workers’ comp is this means of compensation.
So, yes, you do need worker’s compensation insurance even as a sole proprietor.
How Much Does Workers’ Comp Insurance Cost?
As you may have guessed, the cost of workers’ comp insurance for a sole proprietor is based on a variety of factors.
This is why it is best to do your own research on companies providing worker’s comp insurance plans and request quotes from each company that best suit your needs.
Weigh out the pros and cons of these plans just as you would for any other insurance plan and choose based on your budget, type of work, and rate of risk.
Getting Workers Comp For The Self-Employed
If you’re looking for a company to request a quote and happen to be in the state of Florida, we at National Workman’s Comp are more than happy to hear from you. Consider us the Florida experts for workers’ compensation!
We are here to answer any questions you may have concerning sole proprietor workers comp so feel free to contact us today. We’re here to help you get covered with the best insurance plans for your budget and business needs.