Business Owners, Sole Proprietors, Partners, and Independent Contractors are not automatically covered by workers’ compensation insurance.
Business owners and partners can opt into their companies program, by paying the premium for themselves.
Independent contractors, or 1099 employees, are not covered by any workers’ compensation plan unless they obtain one for themselves.
Sole Proprietors can opt out of coverage or can buy self-employed workers’ comp for themselves.
Before you decide to opt out of workers’ comp, or not get coverage in the case of independent contractors or the self-employed, read on. There are risks and benefits associated with this decision.
Everything You Need to Know about Self-Employed Workers’ Comp
If you know already know you need self – employed workers’ comp, click here for your free quote. If you need to learn more, keep reading.
What is Workers’ Compensation Insurance
Workers’ compensation or workers’ comp is the insurance that covers your employees, or yourself when an injury happens on the job. It also covers work work-related illness.
Employers pay for workers’ comp insurance for their employees. It covers medical expenses and lost wages.
Workers’ comp is not covered by the U.S Department of Labor but by a private insurance company, PEO or state-run workers’ comp funds. Check your state’s requirements.
The cost of workers’ compensation insurance is based on job category and the risk of injury associated with that job classification. Lower risk jobs have lower premiums. Consider the difference in risk between those in a clerical role compared to those who are performing landscaping.
Workers’ compensation is also based on a percentage of the employee’s salary. Because the premium is based on yearly salaries, there is an annual audit to ensure that salary estimates match the actual salary.
The National Council on Compensation Insurance (NCCI) determines workers’ compensation job codes. The NCCI codes are based on job duties. NCCI codes are based on job duties.
For the self-employed, the NCCI code is based on your job, not the clerical side of running your own business.
What is the Differences Between Employer-Provided Workers’ Compensation and Self-Employed or Independent Contractor Workers’ Compensation?
Self-Employed and Independent Contract Workers’ Compensation is very similar. It only covers the owner or contractor (1 person). It can also be harder to obtain than workers’ compensation for a larger business.
Employer-Provided Workers’ Compensation
The employer pays all workers compensation premiums, with no employee contribution. It pays for the employee’s medical claims and lost wages if they are injured or acquire a work-related illness on the job.
Self-Employed & Independent Contractor Workers’ Compensation
Self-employed workers’ compensation is personal coverage for the business owner or independent contractor, only.
In addition to medical claims and lost wages. self-employed individuals can also apply for wage replacement. Wage replacement covers BOTH lost wages and lost revenue due to time off work due to the injury or illness.
To learn more about Independent Contractor or Owner Only Policies, click here.
What is a Ghost Policy?
A ghost policy is a zero dollar policy that covers a solopreneur with no employees, but who occasionally hires temporary workers.
In a ghost policy, your policyholder creates a policy and charges you a premium of $0. Should you hire someone that gets hurt on the job, the individual is covered by workers’ compensation.
After the injury, the insurance company performs an audit. After the audit, you are charged the difference in premium costs. The difference is typically due to differences between the estimated salary and the actual salary of the individual. .
This may be one of the best policies out there. There is zero cost if you don’t need it, and full coverage if you do. It also minimizes the risk of not having a policy for an individual that is hired and not obtaining the policy at the time of hire. Unfortunately these type of policies are offered in a limited number of states.
Times When Self-Employed or Independent Contractor Insurance is Required
There are some cases where workers’ compensation is required for either self-employed individuals or independent contractors.
The first is that some states or job classifications require it by law, failing to obtain it can result in significant fines.
You may also be required to obtain workers’ compensation insurance if you occasionally hire temporary employees. See Ghost Policies below.
If you are concerned, for whatever reason, about your own safety or income, you should obtain workers’ compensation insurance.
The Risks of Not Having Workers’ Compensation Insurance
As a self-employed individual or an independent contractor, money is typically a concern. You may choose to opt out of coverage for the sheer costs.
Before you make that decision consider the risks and benefits. Opting out of insurance may save you a little money in the beginning. However, the lack of coverage may bankrupt you in the end.
Ask yourself this question. Who will cover your duties and continue to service your customers if you are unable to work? If the answer is no one, then you should obtain workers’ compensation insurance as it covers lost revenue as well.
You have a higher risk job that, if injured, could result in significant injury. Even with medical insurance, medical bills pile up due to deductibles and co-pays. While you may be able to keep your business going, can you realistically, keep up with the medical bills?
Ready to Get Started?
Contact Us, and we at the National Workman’s Comp Solutions (NWCS) team can help you find the right policy for your self-employed workers’ comp.
We have over 15+ years of combined experience and take pride in our professionalism. Our primary goal is to find you the best solution for your company.
We have assisted businesses nationwide with over 85 different carriers and PEO’s