Are Independent Contractors Covered by Workers’ Comp Insurance?

Posted: 03/02/2021 - 00:09
Independent contractors are workers who offer their services to a business but are not considered employees.

Are Independent Contractors Covered by Workers’ Comp Insurance?

Independent contractors are workers who offer their services to a business but are not considered employees. As a result, they receive no benefits such as paid time off, sick pay and health insurance coverage. In addition, independent contractors must pay their own taxes, including self-employment taxes, at the end of each year. If you are an independent contractor, you and the businesses you work with may wonder how your independent contractor status affects workers’ comp insurance.

How Do You Know If You Are an Independent Contractor?

Although laws regarding the classification of independent contractors vary by state, and the sharing economy continues to blur the lines between employees and independent contractors, independent contractor/employee status typically can be determined by tax documents. Workers who receive a W-2 at the end of each year are considered employees, while workers who receive a 1099 are considered independent contractors.

Do Businesses Employing Independent Contractors Have to Provide Workers’ Compensation Insurance?

Usually, only workers who are considered employees fall under the jurisdiction of local workers’ comp laws. However, there are some states that require that businesses provide workers’ comp coverage for independent contractors. It’s important to check the regulations regarding workers’ comp in your state to be sure you’re in compliance.

For businesses operating in states that require workers’ comp coverage for independent contractors, providing coverage is a matter of classifying employees and independent contractors correctly and abiding by the law. State penalties for noncompliance can vary, but knowing and abiding by local laws will ensure that business owners avoid costly fines and criminal charges.

Why Would Independent Contractors Purchase Their Own Workers’ Comp Insurance?

For the most part, independent contractors are not usually required by law to have workers’ comp insurance coverage. However, there are reasons that someone who is classified as an independent contractor would want or need to get a policy. First, some businesses require workers’ comp coverage before they will enter into an agreement with an independent contractor. This helps to mitigate the business’s risk of liability and financial responsibility in the event that the independent contractor is injured while working.

In addition, some independent contractors may choose to purchase their own workers’ comp coverage to help protect themselves against the financial risks associated with on-the-job injuries. If a self-employed person is injured at work, comprehensive workers’ compensation insurance can help cover the costs of medical bills, lost wages, and more. Having a personal workers’ comp policy is particularly important for independent contractors in high-risk industries, such as construction.


About The Author

Tracey Berg's picture

Tracey Berg is the president of Cerity, a workers’ compensation insurance provider founded with a bold vision to reimagine small business insurance. With its digital-first approach, Cerity is transforming the entire process to empower business owners to quickly and easily protect their team, assets and livelihood through an online workers’ compensation solution. Follow Cerity on Twitter @CerityisHere