Quick Guide to Workers’ Comp Insurance for Self-employed

Cody Cromwell
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What Is Workers’ Comp Insurance for Self-employed?

Workerscompensation insurance is a type of insurance that is jointly established by employers and employees. Workers’ compensation insurance protects workers and their families from any harm due to their jobs.

Workers’ compensation insurance is specifically designed to protect employees from occupational hazards, but sometimes it also covers general injuries as well.

Self-employed people are also covered under the workers’ compensation law, provided they can prove that they are in fact self-employed.

Workers’ compensation insurance is designed to minimize workplace-related injuries, injuries due to defective products, and occupational diseases, as well as ensure payments for bodily injury and death due to accidents during the course of employment.

Is Workers’ Comp Insurance Required for Self-employed?

Workplace injuries and illnesses are most common amongst the self-employed because they are the least protected. Which is why the Disability Insurance Trust insists that self-employed workers carry workers’ comp insurance. It pays your bills while you receive care, healing, and therapy.

If you collect an income from a job, your employer must provide medical insurance. But if you have no employer (or an employer whom you don’t go to work for), you’re considered self-employed and are responsible for your own workers’ comp insurance. Otherwise, you’ll be in a world of trouble if you get injured, sick, or contracted an illness and need time off work.

NOTE: The number of your business/employers is usually taken as one number in determining the workers’ comp insurance premiums.

Do I Need Workers’ Compensation Insurance for Contractors?

If you have ever looked for home improvement or construction contractors, you’ve likely come across contracting insurance that they advertise. Having workers’s compensation insurance is a requirement in the US for any contractor but do you need it? What exactly does it do and how much does it cost? What are the benefits for contractors? If you are self-employed or even work for a company with only a handful of employees, you may not realize that you are actually taking care of dependents of your work-force. You may be covered in the event of an injury on the job, as long as you are covered except for domestic workers. The only problem is, you are on your own when it comes to getting the workers’ compensation insurance.

Read on to find out exactly what you need to know about the benefits and laws associated with contractors’ injuries. You can get a better understanding on what is required to protect yourself as a contractor in today’s workplace climate.

Independent Contractors vs Employees

What’s the Difference?

Working as an independent contractor means that you are not an employee of a company. Instead, you are in business for yourself and are paid by a client or customer. Your client or customer acts as your “employer” in that you bill and are paid for your services and are not an employee of the company.

Contractors are not generally compensated for work-related expenses. Some types of expenses can be reimbursed after they have already been incurred, but many expenses can’t be reimbursed.

Independent contractors earn their income from recurring work with the same client or customer, or through contracts with multiple clients.

Those who qualify as independent contractors are usually professionals, such as plumbers, electricians, and auto mechanics.

Your tax filing status is also determined by how you are being paid. If you are an independent contractor, you are taxed differently than if you are an employee.

It’s important to be aware of the differences between an independent contractor and an employee, especially if you work for a particular company. You are not in business for yourself, you are under the control of the company and you are paid by them to perform services that they need.

Where to Get Workers’ Comp Insurance for Self-employed

Once you establish a business, you’ll need to figure out where you should get workers’ comp insurance. The good news is that there is more than one type (as it’s a complex system). And depending on the type, you can shop for coverage at your state insurance department, your tax registration agent, your city hall, or your state’s Department of Insurance. The section below tells you how to find the right type of insurance coverage for your business. If you have a questions about your workers’ comp requirements, you can call your state’s Department of Labor or Department of Insurance.

Tip: Find the Most Cost-effective Coverage

While there are many types of workers’ comp insurance, the most common for self-employed is the single premium policy. This type of policy will cost you the least amount of money and is often the best deal for your small business.

Unlike a workers’ comp policy that is offered to businesses such as larger companies, freelancers, and start-ups, the single premium policy does not require that you have additional types of insurance. Although this might seem like the wrong type of policy for your business, its simplicity makes it a great choice.

Self-employed Workers’ Comp Insurance Carriers

The Hartford


If you work as an independent contractor, you are likely performing tasks that are physically or mentally demanding. Since you are responsible for the complexity and difficulty of the work that you do, you may be surprised to learn that you are legally considered an employee and not an independent contractor.

If you are classified as an employee, you will be covered by workers’ compensation insurance if you sustain an injury or illness on the job. In order to take advantage of this insurance, you must work for an employer who is already covered by workers’ compensation.

If you have decided to start your own business, you must also take responsibility for your own workers’ comp insurance needs. In most states, it is permissible to self-insure, or pay for your own workers’ compensation insurance yourself. However, if you are required to provide workers’ compensation insurance by the state government, then you can only self-insure if you can show that your business is able to cover the financial requirements of the state. Unless you have a high deductible and self-insurance is permitted by your state, your best option is to choose a workers’ comp insurance carrier that offers the right option for you.

State Farm

Workers’ Compensation Insurance: What You Need to Know

If you earn an income as a freelancer, creative professional or someone else who is self-employed, the chances are you or someone you know is extra protective of their money. So when you’re thinking of getting an insurance policy, like a workers’ comp policy, one of the first questions you’ll likely have is how self-employed you need to be before your state requires you to carry Workers’ Comp coverage.

State Farm Workers’ Compensation Insurance for California

In California, there are different rules depending on whether or not you have an employees’ compensation license or if you’re considered a sole proprietor. Here’s an overview of how self-employed people are treated in California.

Are You an Employees’ Compensation Insured Person?

First off, if you have an employees’ compensation license, then you’re required to carry workers’ comp coverage. These are the professionals who are deemed self-employed but who are directly supervising an employee and are responsible to pay them. There are such licenses for landscape and construction design professionals and computer systems analysts and programmers to name a few.


Getting injured on the job is a stressful time for anyone. Luckily, in most cases, workers’ compensation will cover your medical bills and lost wages. Even if you think you’re fine to return to work after an injury, it’s always imperative that you take time off and recover fully.

Since self-employed or freelance workers depend on other people to get work done, it’s not as safe to work while you’re still injured. Unlike regular employees who work directly for an employer, those in this category have to rely on customers and clients to get work done. Therefore, it’s important to understand the circumstances under which workers’ compensation insurance will kick in.

Liberty Mutual

You have heard people on TV talking about their insurance and their agent, maybe even you have a friend who has generously shared more than enough insurance information with you. However, I recognize that you may have committed to reading only ten minutes of your time for this blog post as you search for a doctor’s note to keep you off work for a few weeks.

So here is the deal, this is Quick Guide to Workers’ Comp Insurance for Self-employed. Just scan it to the portion you need, click here for the table of contents. And I’ll share with you ways to protect yourself and your income if things go dreadfully wrong.

Don’t worry. I have really short and simple information that you can absorb within a minute or two without needing to take notes to review later. Then you can save all of your time for getting some Sunshine, your friends, and a great bottle of red wine.

Workers’ Comp Insurance Costs for Self-employed

During the course of my career, I’ve worked for small law firms and large corporations with all kinds of compensation packages. While I’ve always had a great insurance benefits package, my insurance premiums were very affordable.

So when I started my own business, I had no issues obtaining a great insurance package for my staff. But if you’re self-employed you may not now the exorbitant cost of workers’ comp insurance. The problem is that workers’ comp insurance is applicable to medical services even if you don’t offer them yourself.

Whether you’re an attorney, consultant, business owner, financial advisor, or some other type of professional, you should obtain workers’ comp insurance. Here’s a quick guide to workers’ comp insurance for self-employed professionals.

Sample Self-employed Workers’ Comp Rates by Class Code and State

If you’re self-employed, chances are you’ll want to consider yourself insured before you start your business. If you fail to purchase workers’ comp insurance, you could end up dealing with the aftermath of a workplace illness or injury for months or even years.

During this time, you’ll have to pay for medical expenses, lost wages, and other damages that you and your business should have covered. In fact, your time completely lost trying to get your business back on track, to cover your losses.

Luckily, there’s a solution for this. The Affordable Care Act recently introduced a law you probably already know: health insurance. Surprisingly, many self-employed people don’t carry the appropriate workers’ comp coverage. This has made it extra important for them to find a way to purchase health insurance (or health coverage, as it’s also referred to).

Usually, you have two options for insurance: buy it yourself or get it through your spouse. Since insurance policies don’t tend to be very affordable for your business, many self-employed people opt to get it through their spouse.

How Job Classifications Work for Independent Contractors

Many different factors are used when determining whether or not someone is a direct employee of another business. Common criteria include the type of work being done, if the worker can be terminated at any time, and if or how often the worker is paid. All of these factors are used when determining whether or not a worker is covered by workers’ compensation laws.

There are, however, two main factors that are not just used for determining whether or not a worker is covered by workers’ compensation, but when determining an employee’s status for the purposes of workers’ compensation. These factors especially apply to independent contractors.

The first factor is whether or not the worker is responsible for providing their own tools and equipment. Common examples of tools and equipment that are typical for a direct employee is an company issued alarm clock and coffee pot that are given to a person at the start of their shift. Since direct employees do not have to provide their own tools or equipment (hence the term –direct,”), they’re considered direct employees and are therefore not covered under workers’ compensation laws.

How to Opt Out of Self-employed Workers’ Comp

For many self-employed individuals, workers’ comp insurance is a requirement. In order to take on the risks associated with self-employment, you must inform your insurance agent that you’ll be self-employed and provide them with proper documentation indicating this fact.

Besides the requirements at your state’s Department of Insurance and each respective insurer, your specific situation will also effect if you are required to have workers’ comp insurance. The trouble in categorizing your type of work in Florida is the fact that there are more than 130 different classes of industries, and every one of them requires something different in terms of workers’ comp coverage. The links that are available to you below are a great starting off point to learn about your current status.

I. How to Determine Workers’ Comp Status

I. How to Opt Out of Workers’ Comp

I. Social Security’s Self-Employed Program

Frequently Asked Questions (FAQs) About Self-employed Workers’ Comp

Self-employed people often work outside of a regular establishment, and this can make it tricky to find insurance coverage that works with shift work and other outside jobs. This umbrella insurance coverage solves the problem and can cover a self-employed worker who does labor-based work or business-based work for an employer.

What exactly does self-employed workers’ comp insurance cover?

This coverage protects workers who do labor-based work or business-based work who are injured for work, providing income for their business, or in the course of doing business. It covers you while you are in the scope of your employment, while working, during transportation to and from work, while working away from home at a job, and when injured. A workers’ compensation policy also covers you for any chronic health conditions you may have.

Do I need to provide my own health insurance to be covered under my policy?

No. If you are in good health and have appropriate health insurance coverage you do not need to provide your own health insurance for the workers’ compensation policy. However, you can get your own auxiliary insurance to supplement your workers’ compensation coverage.

What are some common exclusions from workers’ comp?

Do I need self-employed workers’ compensation if I have health insurance?

You should have both. Without medical coverage, you would not be responsible for your injuries under workers’ comp. With medical coverage, you would be more secure and you will not have to resort to more expensive health insurance once the health insurance policy expires. Workers’ compensation is supposed to cover 100% of medical bills for temporary and permanent disabilities and to provide a percentage of an injured worker’s salary. Workers’ compensation is not intended to replace health insurance.

Why did I get a year-end workers’ comp insurance bill?

You just turn in your accurate W-5 and pay as instructed, but here’s your workers’ comp insurance bill for the year.

You May Be Tempted to Pay for a Quick Fix … Low-Ball Your Workers’ Compensation Insurance Premium for the Current Year

But don’t do it! Your workers’ compensation insurance policy pays if you get injured on the job.

Just like car insurance, a workers’ comp insurance policy has some basic requirements.

You’ll need financial coverage, but typically your business can’t be classified as a corporation. (You may have to file IRS Form 8832 … check with your tax professional.)

You’ll need to set aside some money for appeals, which the insurance company may need to file in order to get you your due benefits.

Also, a workers’ comp insurance policy requires that you require a certain amount of coverage, which you’ll know when you’re purchasing your insurance.

For instance, your workers’ comp insurance may require that you set aside 2 times your net payroll for the year.

Am I covered for workers’ compensation by my general contractor?

Generally speaking, your general contractor should be your workers’ comp insurance provider. Since he or she is responsible for payments and is in direct contact with the employer, this is the logical choice.

Pay particular attention to the amount of coverage your general contractor has agreed to purchase for you. Ask for an itemized list of what kinds of workers’ insurance they’re carrying and make sure it meets your personal needs. If it doesn’t, you should look into purchasing your own insurance or calling an attorney to negotiate for you and to ensure coverage is sufficient.

Remember that regardless of who insures your workers’ comp premiums, you always will be responsible for the safest options possible. Even if you don’t have adequate coverage, it’s up to you to make sure the job site is safe and that workers are being treated fairly and humanely.

Depending on the type of work you perform, your insurance policy will specify what kinds of liability coverage you’ll need. See if your general contractor is offering the right amount of coverage and adequate compensation for you to perform your work safely.

Will preexisting conditions prevent me from getting self-employed workers’ comp?

Yes. Self-employed workers’ compensation insurance kicks in once you’ve been self-employed for at least 12 months. During that 12-month period, you can be in a car accident, get sick, and suffer other health conditions that would qualify you for workers’ comp benefits if you were still employed by a company. But if the 12-month qualifying period expires while you’re still in the company of another company owner, then the 12-month waiting period begins again.

The 12-month waiting period is also triggered by ANY change in company ownership. So if you’re still employed by the same company owner when you decide to start your own business, you’re already subject to the 12-month waiting period and are ineligible for workers’ comp when you file for self-employed workers’ comp insurance. If your company owner dies, or you decide to leave that company to concentrate on your own business, the 12-month waiting period is triggered and you will need to wait at least another 12 months before you can file for workers’ comp benefits for your own business.

Does a single-member LLC need workers’ compensation insurance?

Single-member LLCs pay set-up fees upon filing fees with the government. For the purpose of workers’ compensation, single-member LLCs are considered to be a sole proprietorship. However, certificates of self-employment need to be issued by the Social Security Administration to the single-member LLC to indicate that the LLC is self-employed.

Since workers’ compensation insurance is paid by the business entity, it’s important to make sure that the name of the LLC appears on the Workers’ Compensation Insurance policies. So if the business is run through a single-member LLC, you need to make sure that the name of the LLC appears on all the forms and documents. Also, the name of the single-member LLC needs to be included on the business entity’s certificate of self-employment as well.

Hence, the single-member LLC needs to be in good standing with the business formation department and in good standing with the IRS as well to ensure that the business name appears as required on all the forms.

Bottom Line

Here in Texas, a lot of the jobs are offered as independent contractors. These jobs are being offered less and less due to various reasons. Reasons such as "they have no time to train you." "your work phone is never at home", "you leave in a few months," and so on. The testing required on accident prevention, and so on. Can be expensive and are not inclusive of the errors of omission. Every contractor has gone though the endless lineup of employees.

If you are self employed, you are not protected by Texas Workers Compensation if you are injured on the job. Although Texas in in the process of turning over its workers comp to the Texas Workers Health and Medical group, it’s not real cover for the majority of independent contractors.

You have to check your own independent contractor agreement. But have an attorney check it out for you regarding the exclusions. The Texas Department of Insurance can be made aware of the facts, and so on, if they are in error about the exclusion. (Don’t feel like you can’t tell them, they have to tell you!).