Workers’ compensation insurance laws vary from state to state. For instance, some states require employers to get workers’ comp for their employees, even if it’s just one employee. In other states, workers’ compensation insurance becomes mandatory if your company has over “x” number of employees.
Texas is the only state that doesn’t require employers to get workers’ comp for their employees. Workers’ compensation is pretty straightforward for most businesses, but what about a self-employed worker? Well, for self-employed individuals, workers’ comp insurance is a somewhat murky subject.
The million-dollar question for self-employed folks is, “Do I need workers comp insurance if I’m a sole proprietor?”
If you’re a self-employed individual in this workers’ compensation limbo, don’t worry, we’re here to help. Join us today as we explore reasons getting workers’ compensation for your sole proprietorship is never a bad idea.
What Does Workers’ Comp Do?
Employees get sick or injured in one way or another, regardless of the type of business you run. These work-related injuries are heavy on your employees’ pockets and could lead to legal repercussions on your part.
Workers’ compensation is a type of insurance that gives employees compensation and benefits for work-related injuries and illnesses. However, the employees must waive their rights of suing the business should they get injured or sick at work.
Workers’ compensation is immensely beneficial for all kinds of businesses because of its comprehensive coverage. Workers’ compensation insurance can help cover:
Medical expenses: This covers all hospital bills, including medication and doctor visits.
Missed wages: workers’ comp covers for any wages you missed because of your work-related injury or illness.
Vocational rehabilitation: certain illnesses and injuries may require prolonged treatment that goes on for weeks and even months. Vocational rehabilitation covers the ongoing treatments until your employees are back on their feet.
Death benefits: Death benefits are basically funeral costs should the employee pass away because of the illness or injury.
Do I Need Workers Comp Insurance for My Sole Proprietorship?
Getting insurance for self-employed workers sounds unorthodox, but it’s really not. Many self-employed individuals get workers’ compensation for various reasons. In fact, some clients only hire contractors if they have proper workers’ compensation insurance.
That’s because there’s a chance that you might sue the clients should you get injured while rendering your services. The likelihood that the court will rule in your favor is very high. Most clients don’t want to risk and only hire independent contractors with proper workers’ comp insurance.
The only other alternative is for the client to buy workers’ compensation for you. Not many clients are willing to take that route.
Is Workers’ Comp Mandatory for Self-Employed Businesses?
As mentioned earlier, most self-employed individuals find the whole worker’s comp issue a tad murky. While workers’ compensation is mandatory for employers, the same can’t be said for self-employed individuals. In most states, workers’ comp is optional for self-employed folks.
Not many self-employed individuals opt for worker’s compensation, but there are situations where workers’ comp makes sense for the sole proprietor. Some of these situations include:
When working in a high-risk industry: Certain work conditions and operations increase your risk of suffering from a workplace injury or illness. Some of these conditions include exposure to dangerous chemicals, repetitive movements, and over-exerting manual labor. If you work in the above conditions, getting workers’ comp insurance might be a good idea.
Fulfilling State requirements: As mentioned above, workers’ comp for self-employed individuals is mandatory in statements. For instance, in California, roofers are required to have workers’ comp regardless of whether they have workers or not.
Meeting contract obligations: Some companies only work with independent contractors who are covered with workers’ compensation. Meaning to meet your end of the contract, you must get workers’ comp insurance. This helps shield the business from liability should the contractor get injured while serving the client.
It’s also worth noting that employees need worker’s compensation. If you’re self-employed and hire staff, you must arrange for their workers’ comp insurance.
Benefits of Workers’ Comp
Worker compensation insurance for self employed folks comes with a ton of perks that you can benefit from. Whether you’re self-employed or an employee, here are a few pros of workers’ compensation insurance.
Covers for Lost wages
A lot of money goes down the drain when you can’t work because of an injury or illness. Thanks to workers comp, you no longer have to foot the loss should debilitating ad injury render you unable to work. That’s because your insurer will compensate for any lost wages because of the injury.
However, note that most insurers don’t cover the full cost of lost wages. Instead, they cover only half the amount of wages lost. It’s still better than nothing.
Optional Add-on Covers
Most insurers give you the option of including add-on coverage to your workers’ comp policy. A good example is an independent contractor purchasing disability coverage for a subcontractor. Both covers are under the same workers’ compensation policy.
Add-on covers are handy for special circumstances, for instance, injuries from terrorist attacks or disability.
Worker’s comp insurance also covers retroactive state legislation, specifically the federal disability act and the workmen compensation act. You’ll receive compensation for any disability you get when on the job, as per the law. Since the law backs this form of compensation, getting the settlement you deserve will be a walk in the park.
Get Workers’ Compensation Today
Do I need workers comp insurance? Is a question you should be able to answer comfortably. You can never go wrong with workers’ comp for self-employed but only if you find the right insurer. As such, make sure you do your digging and find the best-suited insurance provider for your case.
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