Workers’ comp rules and regulations can be tricky, and you might be looking for advice on if you need this type of insurance as a sole proprietor.
State governments regulate workers' comp, and the rules are slightly different in each state. Generally, if you’re a sole proprietor and you don’t have anyone else working for you, you probably are not required to have workers’ compensation insurance.
However, you will probably need workers' comp if you hire people to work for you — even if they are working part-time or as independent contractors.
Workers’ Comp insurance for self-employed independent contractors
Here are some examples of when different types of self-employed independent contractors might need workers’ comp:
Joe is a plumber who works on his own, but when he lands a big job, his nephew, who is also training to be a plumber, works with him.
If the nephew gets hurt installing a U-bend, Joe might have to pay his medical costs, which could be pretty high. Workers’ comp would help pay for expenses, and it could be required in Joe’s state.
Learn more about plumbers insurance.
Lily’s outdoor yoga practice is taking off, so she expands her classes to include more students.
She has a friend who is also a yoga teacher, Ben, and she asks him to teach with her so she can give individual attention to her students.
Ben thinks he’s an independent contractor who’s working alongside Lily, not an employee who needs workers’ comp. But some states would see him as an employee and require Lily to have workers’ comp.
Check with your state’s workers’ compensation agency to make sure you comply with laws regarding workers’ comp for sole proprietors.
Learn more about yoga teacher insurance.
Do I need Workers’ Compensation insurance for myself?
It might seem odd to buy workers’ compensation for yourself, but it’s not that uncommon. Many companies will only hire an independent contractor if they have workers’ comp. This is because they want protection from potentially expensive lawsuits if someone gets hurt while working for them.
It’s legal for a company to refuse to hire an independent contractor unless they have workers’ comp
Most companies don’t want to buy workers’ comp for sole proprietors they hire to power wash the floors or do a company photoshoot. But they also don’t want to have to pay medical costs if someone gets hurt.
That’s why they’ll ask you to provide a certificate of insurance with active coverage before you sign a contract with them.
There are also benefits to buying workers’ comp for yourself
If you get hurt at work and have workers’ comp, you won’t need to use your personal health insurance to cover medical costs.
Even if your medical insurance provides coverage for treatment expenses, it won’t cover any of your lost wages. Workers’ comp can help with that.
What is the sole proprietor Workers’ Comp exemption?
In some states, you can get a sole proprietor workers’ compensation exemption.
A workers’ comp exemption is a declaration that coverage isn’t necessary because there are no employees. In California, for example, you can’t get your contractors’ license renewed unless you have proof of paying workers’ comp, or a valid sole proprietor workers’ comp waiver.
To get a workers’ comp exemption for sole proprietorship, you will have to complete the right form for your state, get the form notarized and usually pay a small fee.
You won’t have to pay for workers’ comp coverage, but they might have to pay out of pocket to cover expenses if you get hurt at work.
Other insurance policies sole proprietors should consider
While we’re talking about workers’ comp, there are types of business insurance that sole proprietors often purchase. The most important is general liability insurance.
General liability covers you in case someone other than you or an employee gets hurt or their property is damaged through your work. It’s also called slip-and-fall insurance because it covers medical costs if someone gets hurt at your shop or office.
Sole proprietor insurance packages can also include:
- Commercial auto insurance if you use a vehicle for work
- Professional liability insurance to protect you in case your customers aren’t happy with your work or advice
How NEXT Insurance helps sole proprietors
We’re 100% dedicated to helping self-employed professionals and small business owners find the right insurance at affordable prices. Since we only help business owners like you, we can create a customized insurance package that is often cheaper than other options.
All of our services are online, so you can get an instant quote, review options and purchase coverage in less than 10 minutes. You’ll have immediate 24/7 access to your certificate of insurance as soon as you buy your insurance.
Our team of U.S-based insurance advisors is standing by to help if you have any questions.
Get an instant quote today to get started.