Workers' Comp Insurance for Contractors

If you own a contracting business or work as a contractor, having the right workers' compensation insurance is critical. A workers' compensation policy can provide reimbursement for medical treatments, lost wages, and more if an employee gets injured or ill due to their job in some way. Providing this coverage can also help your business avoid a potentially costly lawsuit after a workplace incident.

Fortunately, a local independent insurance agent can help you find the right workers' comp insurance or business insurance for contractors. They'll get you set up with the ideal amount of coverage. But first, here's a closer look at contractor workers' comp insurance, what it covers, and why it's necessary.

Why Do Contracting Businesses Need Workers' Comp Insurance?

Workers' compensation coverage is essential for businesses in the contracting industry. Injured workers are common in the construction and contracting fields, so having a workers' compensation insurance policy to protect your team is a must. 

Due to the physical nature of contracting work, injuries, illnesses, and fatalities are much more prevalent, and these incidents can cause extremely costly issues for businesses that fail to secure the proper coverage. Often, clients won't agree to work with a licensed contractor if they can't provide proof of workers' compensation with an official certificate of insurance (COI) to reduce their liability. 

Without a workers' comp policy, your business could also be vulnerable to employee lawsuits after an incident. Further, affected employees may be unable to return to work after an accident that requires extensive recovery time or rehabilitation, leading to lost wages. 

Most contracting firms and construction businesses are also required by law to provide workers' comp coverage if they have any employees. Workers' comp laws depend on your state's specific requirements.

Does an Independent Contractor Need Workers' Comp Insurance?

You may be wondering, "Do I need workers' comp insurance for 1099 employees?" It depends on your state's requirements. Many employers are still required to provide workers' comp coverage for 1099 employees or independent contractors who do not complete W-2s. Even if coverage isn't technically required for part-time employees, independent contractors, or subcontractors, many customers and clients may refuse to do business with a worker who doesn't have workers' comp coverage.

So, do 1099 employees need workers' comp insurance? Laws aside, the answer is still often yes. Having workers' comp insurance for independent contractors can help ensure your business meets state requirements and that clients will agree to work with the workers you hire, even if they're technically not full-time employees. Providing workers' comp coverage for all workers can also help your business be exempt from lawsuits should a work-related incident that results in injury or illness occur.

What Does Workers' Compensation Cover for Contractors?

Workers' compensation insurance coverage can help pay for many expenses related to injuries and illnesses that arise from the job in some way. Covered injuries and illnesses must have been caused by the job environment, an accident at the workplace, or job duties. Injuries and disabilities that develop due to repetitive motion or tasks over time are typically covered as well. Workers' comp can reimburse affected employees for the following:

Workers' compensation benefits often also cover the cost of retraining if a business must hire a new employee after a covered incident. In the event of a work-related death, workers' comp can provide a death benefit payout to the surviving family members of the deceased employee.

Do Contractors Need Their Own Workers' Comp Insurance?

Sole proprietors, partnerships, independent businesses, and limited liability companies (LLCs) are typically not required to carry workers' comp if they don't have any employees. However, there are some exceptions, even in the case of self-employment. Be sure to review your specific state's laws to determine if your sole proprietorship is required to obtain workers' comp.

You may choose to go the self-insured route when it comes to workers' comp. Business owners who decide to self-insure must follow local guidelines. You can also apply for a workers' comp exemption, though it's typically not wise to remain uninsured and skip coverage altogether. 

What Are the Risks of Hiring a Contractor without Workers' Comp Insurance?

Choosing to hire a general contractor or subcontractor without workers' compensation insurance can present a huge risk to you or your business. If someone who works for you is not protected by workers' comp, you could be held liable for any workplace or work-related incidents that result in injury, illness, disability, or death. If your hired contractor suffers an injury, illness, etc., you could be stuck paying out-of-pocket for their medical treatments, lost wages, rehabilitation costs, and more.

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How Much Is Workers' Comp Insurance for Contractors and Contracting Businesses?

The cost of workers' comp can vary considerably depending on a number of factors, such as your insurer. Workers' comp for contractors can start at just $21 per month. However, the average cost of workers' comp for construction companies and general contractors is $254 monthly or $3,054 annually. 

The cost of your policy can depend on the following:

• Your history of workers' compensation claims
• The insurance company you go through
• Your business's industry
• Your business's operations and exposures
• Your employee classifications

A local independent insurance agent can help you find affordable workers' comp insurance from a reliable carrier near you.

An Independent Insurance Agent Can Help You Find Workers' Comp for Contractors

When it's time to find the right workers' comp insurance for contractors or a contracting firm, no one's better equipped to help than an independent insurance agent. These agents have access to multiple workers' comp insurance companies, so they're free to shop and compare policies and rates for you. 

They'll get you matched to a policy that offers the best blend of coverage and cost. And down the road, your agent will still be there to help update your coverage as your business's needs evolve and can even file workers' comp claims for you.