How can Workers’ Compensation for contractors help your business?
Workers’ compensation insurance can help protect contractors from financial losses after a work-related injury or illness — whether you’re self-employed as a sole proprietor or independent contractor, or if you manage a crew. Workers’ compensation coverage can help your business cover the costs of:
- Medical expenses
- Lost wages
- Job retraining
- Permanent disability benefits
- Death benefits
- Employers liability in the event of a lawsuit
If you’re a solo contractor, you have the option to add business owner’s coverage to your policy to cover yourself.
1. Workers’ Comp is usually required by state law
In most states, workers’ compensation insurance is required by law if you have employees. Many states require insurance coverage for full-time and part-time employees, as well as subcontractors and self-employed workers. For contractors, the requirements are often stricter for licensing than for other industries: Even if you work alone, a workers’ comp policy could still be required. General contractors, electricians, plumbers, HVAC technicians, roofers and other trades often need to show a certificate of insurance (COI) to get or renew a professional license, submit a bid or comply with state laws. Even if it’s not a requirement in your state, many commercial clients and general contractors won’t hire a subcontractor who doesn’t carry workers’ comp.
2. Workers’ Comp could help shield your business from the cost of work-related injuries
Working as a contractor is physically demanding and prone to risk. Workplace injuries like falls, repetitive stress trauma, slip-and-fall incidents, spinal injuries and equipment accidents can happen even on well-managed job sites. The construction industry reported 173,000 nonfatal workplace injuries in 2023 and had the most private industry workplace deaths of any sector in 2024 (1,034 fatalities), according to the U.S. Bureau of Labor Statistics. If you or an employee get hurt on the job, workers’ comp could help cover those costs so a single incident doesn’t put your business at risk.
3. Your income and your employee’s income could be protected under Workers’ Comp
If someone covered by your workers’ comp insurance needs time away from work to recover after a covered injury or illness, a percentage of their income could continue until they’re able to get back to work. For a contractor whose income depends entirely on showing up to work, that financial protection could be a dealbreaker.
What could contractor Workers’ Comp insurance help cover?
These are some of the most common risks that general contractors, plumbers, electricians, HVAC technicians, roofers, carpenters and other trades can face on the job:
1. Medical bills for accidental work injuries and illnesses
Your employee trips at a construction site, hits their head, and requires a visit to the emergency room.** Nonfatal falls like these happen nearly three times more frequently in construction than in other industries, according to the Bureau of Labor Statistics. According to the U.S. Bureau of Labor Statistics, falls, slips and trips accounted for roughly 38% of all construction fatalities in 2024 — more than any other cause. Workers’ compensation insurance could help cover medical costs in case of an incident.
2. Lost wages after an injury or accident
If a worker injures their back lifting heavy materials or equipment on the job, workers’ comp insurance could help cover lost wages while they recover.
3. Work-related permanent injury or death expenses
In the event of a serious or life-threatening accident, contractor workers’ comp could help cover long-term disability benefits, burial expenses or survivor benefits for an employee’s family.
4. Legal costs for an employer liability lawsuit
If an injured worker files a lawsuit against your business claiming that negligence put them at risk — for example, if they claim inadequate protective equipment contributed to their injury — contractor workers’ comp insurance could help with legal defense costs.
How much does Workers’ Comp insurance for contractors cost?
The cost of workers’ compensation insurance for contractors and trades (also called the premium) can depend on a number of factors, including:
- The type of work you or your employees do and the related class codes.
- The number of employees you have.
- Your payroll expenses.
- How long you’ve been in business.
- The state where you work.
- Your claims history.
Rates can vary significantly by trade. A roofing contractor may pay more than a carpenter. A contractor with a clean claims history will typically pay less than one with prior claims. Try the ERGO NEXT workers’ comp calculator to see an estimated price for your trade and state. Or, in about 10 minutes you can get a free workers’ comp insurance quote for your exact business to see what you’ll pay for your specific coverage.
Do I need Workers’ Comp insurance for myself if I’m an independent contractor?
If you’re a sole proprietor or self-employed contractor, you may not be legally required to carry workers’ comp (also called workman’s comp insurance). But going without it means a single job site injury could wipe out your income. And you can’t just count on your personal health insurance. Contractor workers’ comp could cover work-related injuries. But unlike your health insurance, it also includes lost wage replacement while you recover. For a plumber, electrician or carpenter whose income stops the moment you can’t work, that difference matters.
Do I need Workers’ Compensation insurance for the independent contractors I hire?
You generally don’t need to provide workers’ comp coverage for the independent contractors that you hire. But if you misclassify an employee as a contractor (according to the rules in your state), you could owe back premiums and face penalties — even if you’ve been paying them on a 1099. Some states have strict definitions about who actually qualifies as an independent contractor. This distinction is especially important in the trades, where long-term crew members and regular helpers can blur the line between contractor and employee.
Do I need Workers’ Compensation insurance for subcontractors?
If your subcontractors carry their own workers’ comp policy, you’re generally not required to cover them. But if they get hurt on your job site, there’s a risk that they’re found to be your employee — even if they’re genuinely independent and you’ve never treated them as employees. That’s why it’s standard practice in the trades to require a current certificate of insurance (COI) from every subcontractor before work begins. But just seeing their COI isn’t enough. You need to verify that their policy is still active. An expired policy is the same as no coverage at all. If you’re a general contractor managing multiple subs on a project, check the workers’ comp rules in every state where you work, and consider consulting an attorney. Requirements vary and, on larger commercial projects, the general contractor agreement may specify minimum coverage levels for every subcontractor on-site.
What are Workers’ Compensation classification codes for contractors?
Workers’ compensation class codes are three- or four-digit codes used by the insurance industry to estimate how much risk is involved for every job type. Classification codes also set the premium associated with different types of work. For contractors, class codes matter more than in most industries because risk levels vary by trade. Jobs that are high-risk — like roofing, electrical work or concrete work — usually come with higher premiums. Work that is lower-risk — like interior painting or finish carpentry — typically carry lower rates. Workers’ comp classification codes are set mostly by the National Council on Compensation Insurance (NCCI), but some states use their own codes. Understanding the workers’ compensation class code for the type of work you do gives you a clearer picture of your risk level and what you can expect to pay.
How can I get Workers’ Compensation insurance for general contractors?
Workers’ comp insurance, required in most states if you have employees, could help provide financial protections for general contractors who suffer a work-related illness or injury.
Learn more about workers’ comp for general contractors.
Where can I find Workers’ Compensation insurance for roofing contractors?
Most states require workers comp coverage as soon as you hire your first employee. And you might need coverage before you can get your roofer’s license. Workers’ compensation insurance for roofing work can help cover medical costs, lost wages and employer liability if someone on your crew gets injured or sick from work.
Learn more about workers’ comp insurance for roofing contractors.
Do you have Workers’ Compensation insurance options for drywall contractors?
Workers’ compensation insurance could help you and your employees after a workplace accident. Most states require coverage as soon as you hire your first employee, and you might need proof of insurance before you can get your drywall service and repair license.
Learn more about workman’s comp insurance for drywall contractors.
Four of the most common mistakes around contractor Workers’ Comp insurance
Contractors often make these errors when they’re looking for workman’s comp coverage:
1. Worker misclassification
If you hire workers as independent contractors but they function as employees under your state’s definition, they could be entitled to benefits under your workers’ comp coverage. You may have to pay retroactively for their coverage, plus penalties for failing to carry the insurance. In the trades, where long-term crew members often blur the line between contractor and employee, misclassification is one of the most common and costly mistakes small business owners make.
2. Don’t forget to get proof of subcontractor insurance coverage
If a subcontractor working on your job site doesn’t carry their own workers’ comp policy and they get injured, you could be responsible for the costs. That’s why it’s standard practice in the trades to require a certificate of insurance (proof of insurance, also called a COI) from every subcontractor before work begins.
3. Get Workers’ Comp coverage compliant with licensing requirements
Many state licensing boards require proof of workers’ comp for contractors as part of the license application or renewal process. If you operate without the required coverage, you could have your license suspended or revoked.
4. Report business changes throughout the year to ensure premium accuracy
Your workers’ comp premium is based on an annual estimate of your payroll and job classifications at the start of the policy. If your crew grows or you take on higher-risk work during the year, your actual premium may differ from your estimate. Keeping your payroll information current throughout the year can help you avoid surprises when it’s time to do your workers’ compensation audit.
