Workers compensation insurance refers to a form of coverage that provides employees who have been injured on the job with wage replacement and financial assistance for medical costs. In exchange for the medical benefits and wage replacement, the employee gives up their right to claim negligence and sue their employer.
Here's more about whether self-employed people need workers compensation insurance.
Is Workers Compensation Insurance Required?
Most employees who get a W-2 form from their employer are covered by workers compensation insurance. This is the case because most states require employers who have a minimum of one to five employees to buy workers compensation insurance.
In a few states, employers are not required to purchase a workers compensation insurance policy. However, even in these states, it is highly recommended that employers purchase a policy to protect their employees and themselves. Not having a workers compensation policy makes employers highly susceptible to getting sued for on-the-job injuries.
An individual is considered self-employed if they are an independent contractor, a freelancer or a sole proprietor. Self-employed people are generally not required to be covered by workers compensation insurance.
Should Self-Employed People Buy Workers Compensation Insurance?
In some cases, an employer may want to hire a self-employed individual who has their own workers compensation insurance. Independent contractors without workers compensation insurance coverage who are injured on the job while working for an employer may sue the company or initiate an arbitration process. Depending on the risks associated with a certain position, the contracting company may avoid hiring independent contractors without workers compensation insurance.
If you are self-employed and want to contract with companies, you should consider getting a workers compensation insurance policy for yourself. For example, if you work in the construction industry, you may struggle to get contracted as a self-employed individual unless you get a workers compensation policy. The reason for this is that construction jobs are normally considered very high-risk.
Workers compensation insurance is not always necessary for the self-employed. However, employers may be hesitant to hire a self-employed individual who will not have coverage — as there will always be a risk that they will get injured on the job. Therefore, it may be worthwhile for self-employed people to purchase a workers compensation insurance policy for themselves — as it can provide a competitive edge in the job market. For more information on workers compensation insurance, don't hesitate to contact Consolidated Insurance Markets.
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