Do I Need Workers’ Compensation Insurance if I’m Self Employed?
More than 30 percent of the American workforce is self-employed or working as a sole proprietor. If you’re one of them, you know that working for yourself is incredibly liberating. You’re in control of your schedule, your income, and your business’s policies.
That said, being self-employed also comes with a number of responsibilities that many entrepreneurs simply overlook. The best way to protect yourself is with the right types of business insurance.
Within the broader umbrella of business insurance, there are many different types of policies that can help your company. However, figuring out what you need isn’t always easy. If you’ve been asking yourself, “do I need workers’ compensation insurance?” the answer might surprise you.
Here’s what you need to know about this unique type of business insurance.
You’re Not Required to Have Workers’ Comp
Typically, workers’ compensation insurance is something that businesses with two or more employees need to have on the books. As a self-employed worker or sole proprietor, you’re not required by law to have coverage.
This means you can’t face a fine or get penalized by the state or local governments for not having workers’ compensation coverage. However, if you end up hiring another person to help you grow your brand, you’ll need to invest in coverage as soon as possible.
Investing in Workers’ Compensation Can Be Smart
Though workers’ compensation coverage isn’t something you’re legally required to have as a sole proprietor, it can still be a good idea to invest in coverage. It all comes down to the types of risks you face and the industry you’re working in.
Typically, if you work in a physically demanding industry, work-related injuries are fairly common. In 2018 alone, employers reported more than 2.8 million injuries over the course of the year. Those injuries make it difficult if not impossible to perform your job duties.
Though most businesses that use workers compensation insurance do it because they have employees on staff, it can still be a good investment for a sole proprietor. These are just a few reasons why you could benefit from the coverage.
Companies Can Refuse to Hire You
Though you’re not required by law to have workers’ compensation coverage, it can still make getting contract work easier. Believe it or not, companies can refuse to work with you if you don’t have coverage.
If you get injured while working for them, they could be liable for your injuries if you don’t have workers’ compensation insurance. Their policy may not cover contractors like you and many businesses won’t be willing to take the risk. The last thing they want to do is have to pay out of pocket for your injuries and medical treatment.
If you can present proof of coverage at the time you make your bid for the job, you increase your chances of getting the contract. This shows the company that you’re responsible and take ownership of everything you do while on the job.
You Can Still Get Hurt on the Job
Think about what would happen if you got injured while working. Your health insurance policy would help pay for the cost of your medical treatment. However, it could cost you thousands depending on the type of health insurance you have.
Worse, you’re stuck relying on your savings if you can’t return to work immediately.
Investing in workers’ compensation coverage is one of the best tips for entrepreneurs and solopreneurs. If you get hurt, the insurance will pay for your medical treatment as well as provide a portion of your normal income while you recover.
You’ll Be Covered if You Outsource Tasks
As your business grows and expands, you may need to outsource certain tasks to help you keep up with demand. This isn’t a bad thing, but it does increase your liability as a business owner.
Without workers’ compensation insurance, you risk having to pay for your contract employees’ work-related injuries. At best, this can put strain on your operating budget. At worst, it can leave you dipping into your savings just to stay afloat.
With coverage in place, the people you hire to help you, even on a short-term basis, will have the protection they need. Even better, if you end up expanding to a two-person team, you’ll already have the right coverage for your operation.
There Are Other Types of Insurance You Should Buy
Though workers’ compensation is one of the best ways to protect yourself from expensive medical bills, it’s not the only type of insurance you need. You still need to protect your business from liability no matter how big your company gets or how small it stays.
At a minimum, invest in a comprehensive business owners’ plan. This type of insurance will protect you from general liability risk and makes it easier for you to stay afloat if you’re facing a lawsuit.
If you use your personal vehicle for work-related purposes, you’ll also need to buy commercial auto insurance coverage. Most personal auto insurance policies won’t cover accidents that happen while you’re working. If you try to file a claim for a work-related incident, they can even pull your coverage entirely.
If you’re not sure where to start looking for coverage, speak with your insurance agent. Remember, they understand your business and the types of risks you face. They’ll be able to recommend different coverage options so you can keep your business safe at all times.
Still Asking “Do I Need Workers’ Compensation Insurance?”
If you’ve been asking yourself, “do I need workers’ compensation insurance?” and are still on the fence, the best thing you can do is explore your options. Workers’ comp coverage helps protect you against unexpected medical bills when you’re injured on the job.
Since you can’t prevent every possible work-related injury, investing in coverage is a smart move for your business.
Keep in mind that every business is different. If you’re not sure how much coverage you should buy or what types of policies you need, speak with your insurance agent. Just remember to shop around and compare prices and coverage options so you can find the best deal for your needs.
For more tips and tricks to help you keep your business running smoothly, check out our latest posts.