How to get workers’ compensation insurance for your sole proprietorship

“I’m self-employed. Do I need workers' comp?”

If you are a sole proprietor, you might be asking yourself this question. You are your own boss, you have no payroll, and there are no employees on your roster. So, why would you need workers’ compensation insurance if there are not any workers to compensate? For many in sole proprietorships, a workers’ compensation policy can protect you from potential headaches in the future. Workers’ comp also protects business owners who want to avoid any costly situations.

Does a sole proprietorship need workers’ compensation coverage?

Even as a company of one, you are not always working alone. Depending on your business and the volume of work to deliver to your clients, you will hire employees as a sole proprietor—either as part-time or subcontracted.

Subcontractors may not be employees in terms of payroll and tax reporting, but if they have W2 forms or 1099s, they are still performing work for you. If they injure themselves or someone else while operating under your business, then you have yourself a workers’ comp situation.

Before you jump to the conclusion that you will not need workers’ comp coverage, let’s look at a few different industry scenarios. Let’s say you have a carpentry business, and you are hiring a team of contractors for a home improvement project. Depending on the project’s size, scope, and timeframe, you might be leading a substantial team of people. If one of your crew members falls on the job, or any other of the many possible mishaps that can happen on the work site occurs, a 1099 form does not shield you from liability to compensate for these work-related injuries.

Speaking of events, suppose you are in the event planning field, or your business is hosting a live event. You have an “on-call” team of helpers ready to help make the special occasion a success. A sign could fall on someone, or a member of your designated set up or tear down group could throw their back out lifting a heavy object. Or, people could trip and fall while running around between reloading the buffet and getting the podium ready for the keynote speaker. If all of this sounds like a bad dream, imagine the nightmare of having these occurrences without a workers’ compensation plan!

Even if your small business differs from any of the examples referenced, the main point still stands. Regardless of IRS reporting status, any person doing work under your supervision can make a workers’ compensation claim if they get hurt while working. And, you do not want to wait until it’s too late to protect yourself in case the crisis happens.

Do I need workers’ comp as a freelancer?

We’ve covered how the small business owner can cover themselves with workers’ comp plans, but what about the workers themselves? Prospective clients may believe it is safer to hire a freelancer who has their own workers’ compensation insurance policy, depending on the type of services you provide.

You may be the expert and know exactly what you are doing at all times, but no one can predict when an accident may occur—no matter how many times you’ve done the same job. Should that happen, you do not want to leave your clients responsible for covering your injuries. A policy for yourself will give those customers the peace of mind they need to trust you to deliver quality work. Clients may ask for a Certificate of Insurance, so be sure to have this at the ready.

How workers’ compensation exemptions work

There are occasions where business owners—even workers—are exempt from workers’ compensation benefits. For example, if you own a business with few employees or independent contractors on the roster, you may not be required to provide workers’ comp. A few other individuals may be exempt: LLC members, company partners, corporate officers, and sole proprietors. However, it is always wise to check with your state’s laws to see what is and isn’t required.

If you are a sole proprietor with no employees, you will most likely be exempt from purchasing this insurance. Some states will grant you a sole proprietor workers’ compensation exemption, but every state handles this differently.

It is important to note that there are instances when a client may require workers’ comp. First, it decreases their liability should you be injured while completing work, and second, they may not have the available funds to cover the expense themselves. Also, the State of California can refuse the renewal of a state contractor’s license if you do not have workers’ comp or a sole proprietor workers’ comp waiver. It truly all depends on where and how you are conducting business.

The benefit of purchasing workers’ comp

The main benefit to having a workers’ comp policy as a sole proprietor is this: Should you be injured on the job, workers’ comp will cover medical bills and other related expenses. If you do not have health insurance, workers’ comp may be the only way to cover these expenses.

Other insurance for sole proprietors

• General liability insurance: If you are a sole proprietor conducting a business inside a home office or small workspace outside of the home, it may not hurt to purchase general liability insurance. Should your office space be damaged or equipment be stolen, this insurance coverage covers the cost of repair or replacement. Get a free quote for general liability insurance.
• Employer’s liability insurance: Should an employee file a lawsuit against your business for additional damages beyond lost wages and medical care expenses, employer’s liability insurance has you covered. Employer’s liability insurance will also cover legal costs associated with an injury-related lawsuit. Keep in mind: Employer’s liability insurance is included in workers’ comp. It is not a separate insurance policy.
• Commercial auto insurance: Say you have a vehicle to get to and from business meetings, on-site assignments, or office space. Commercial auto insurance can cover any injury associated with, or damage to, your covered vehicle. Get a free quote for commercial auto insurance.

Get affordable workers’ comp insurance with Huckleberry

So, while it may not be mandatory to receive workers’ comp insurance as a sole proprietor, it can never hurt to have an extra layer of protection.

With Huckleberry, getting workers’ compensation has never been easier! You can do it in the time it takes to brew a pot of coffee, and you can manage your policy whenever you want from our online business insurance portal. Use our workers’ compensation calculator to find out your rate today!