Do self-employed entrepreneurs have to carry workers’ compensation insurance for themselves?

Generally yes. That will depend on state laws.

Question

Do self-employed entrepreneurs have to carry workers’ compensation insurance for themselves?

Ellen Harman · Accepted Answer

It depends on their business and the sate of the US in which they are in.

If it is just one person, probably not. However, most entrepreneurs form a corporation which creates a separate legal person which employs the real person.

If the business contracts with others, the customer may require proof of insurance coverage.

In Illinois, if it is an agricultural business, there will be different rules based on number of days worked per year.

Interesting query: if you start a new, legal pot growing business, is that an agricultural enterprise?

Well known insurance risk fact: Agricultural work is some of the most hazardous work out there.

You need a local lawyer and a good insurance broker to answer these questions, not some strangers on the ineternet

Hattie Spade Cunningham · Answer

WC insurance is compulsory in Delaware if an employer has one or more employees.  In Virginia there is an exemption available for employers with less than three employees.  Presuming if your employee is working in Virginia and injured in Virginia they will claim Virginia benefits and workers' compensation insurance is not be required.  If they claim Delaware benefits, however, then you would be obligated to cover them since the insurance is compulsory.  What jurisdiction is chosen when a worker is injured is a gray area.  I'd recommend consulting with both state's workers compensation boards or your insurance carrier for a definitive answer.

Brett Arthur · Answer

It varies state to state, however if you have an FEIN or EIN for the company, typically you would need to file for a worker’s comp exemption in your state. These exemptions are only available to registered owners or officers of a company. Some business owners get their exemption, but then get hired on by another vendor for contracts, etc. In these scenarios and the trend I am seeing lately is that vendors are now requiring proof of work comp coverage to finalize a contract. This means if no employees to provide coverage for…you would have to revoke the exemption with the state. If you need any other help please feel free to reach out. brett@legacyemployerconcepts.com. I hope this helps

Brad Kirby · Answer

Definitely! Workers’ Compensation Insurance offers benefits to workers who are temporarily or permanently disabled due to a work-related accident. The law obligates an employer to have this coverage in place and mandates reimbursement for medical expenses, extended income protection and support services. If you don't carry this insurance, the business is at-risk for extensive future legal liability if an employee becomes injured on the job. You don't need just one single form of coverage – find out more here: https://hdyoung.com/insurance-products/

David Mount · Answer

Any business that employs non family members must have workers’ compensation. States allow owners to waive their right to WC and it may apply to family members but non family must have the insurance.

if you don’t comply, the results could be devastating.

Neil Marcus · Answer

Buying Workers Compensation protects the business owner from being sued for medical expenses and lost wages and, permanent injury settlement. Without Workers Compensation your employees can break through your corporate shield and go for your personal assets.

That should be more than enough incentive to buy this important coverage.

Stefina Weasley · Answer

Workers compensation insurance (also mentioned as workman’s or workers’ comp) is one way that small business employers can help shield the people who work for them and their company from the costs associated with work-related accidents, injuries, and illnesses.

Employers have a legitimate responsibility to provide a safe environment for their workers, but accidents happen. And some business environments have inherent health risks.

Kirstjen Lorenz · Answer

Probably not, but you should check with your state’s Department of Insurance to be sure. Many states don’t require workers compensation for sole proprietors, for family farms, and other businesses that only employ family members, but the law varies from state to state.

Sam Tucker · Answer

No, generally not.

It can vary by state and the scope of work that you do, but you typically have to have 3 employees before you need to purchase workers’ compensation insurance.

However, just because you may not be required to carry this coverage, you may want to consider purchasing one or some type of occupational accident coverage for your employees who may be injured while doing work for you. This is even more important if you don’t provide health insurance for your employees.

Purchasing this coverage or a similar coverage could help you avoid some costly litigation or at least legal expenses down the road.

Be sure to check with your insurance agent and your legal counsel and weigh your options carefully.

Good luck and thanks for the A2A!

JVRC Insurance Services · Answer

Workers' compensation insurance is a crucial aspect of safeguarding your business and employees. Essentially, it's a type of insurance that provides benefits to employees who suffer work-related injuries or illnesses. These benefits typically cover medical expenses, lost wages, and rehabilitation costs incurred due to the workplace incident.

Now, do you need it for your business? Absolutely. Here's why:

1. Legal Requirement: In most states, including California, having workers' compensation insurance is mandatory for businesses with employees. Failing to provide this coverage can lead to severe penalties, fines, and legal ramifications. It's not just a choice; it's a legal obligation.
2. Protection for Your Employees: Your employees are your most valuable asset. Workers' comp insurance ensures that if they're injured on the job, they receive the necessary medical care and financial support without putting the burden solely on your business.
3. Protection for Your Business: Without proper coverage, your business could face significant financial risks. Medical bills, legal fees, and compensation payouts resulting from workplace injuries can be financially crippling. Workers' comp insurance shields your business from these potential financial disasters.
4. Ethical Responsibility: Providing a safe and secure work environment is not only a legal requirement but also an ethical responsibility. Workers' compensation insurance reflects your commitment to the well-being and safety of your employees.
Now, if you're in Los Angeles and looking for comprehensive insurance solutions, I highly recommend considering JVRC Insurance. They specialize in providing tailored insurance packages for businesses, including workers' compensation coverage. Here's why they stand out:

* Expertise: JVRC Insurance has extensive experience in the insurance industry, particularly in the Los Angeles area. They understand the unique needs and challenges faced by local businesses.
 * Customized Solutions: They offer personalized insurance solutions tailored to your specific business requirements. Whether you run a small startup or a large corporation, they can create a comprehensive insurance package that fits your needs and budget.
 * Exceptional Service: JVRC Insurance prides itself on delivering top-notch customer service. Their team of professionals is dedicated to providing prompt assistance, answering your questions, and guiding you through the insurance process.
 * Local Presence: Being based in Los Angeles, JVRC Insurance has a deep understanding of the local market dynamics and regulations. They can provide valuable insights and support to ensure your business remains compliant and protected.
In conclusion, workers' compensation insurance is not just a legal requirement; it's a fundamental aspect of protecting your business and employees. If you're in Los Angeles and seeking reliable insurance solutions, JVRC Insurance is your go-to partner for comprehensive coverage and peace of mind.

Ben Duncan · Answer

Short answer, No …

Robert Whitaker · Answer

Not really. Although some would carry medical and disability insurance if they were a just a single worker with no employees to protect themself if injured .

Susheel Agarwal · Answer

In India, the Workmen Compensation Act applies to any Establishment that employs 20 or more workers. The classification is based on the number of workmen employed.

Garrick Saito · Answer

[US employment perspective]

The truth is, businesses don’t have a choice.

Having workers compensation insurance coverage for your employees is the law (except for businesses in Texas). Insurance insures your employees are taken care of properly, in the event that people are injured on the job.

Think of the following scenario: You operate a business using heavy machinery. Your employee has an accident while working. Perhaps a piece of equipment malfunctions, severing both of his legs or leaving him a quadriplegic for the remainder of his life. Without insurance, who pays these costs?

Devastating costs such as these could cripple an otherwise healthy small business or put a struggling businesses out of business, having insufficient cash flow to pay for these unwanted expenses.

That is what insurance is all about.

The government doesn’t want to take any chances of these kinds of events happening, as both employees and businesses would be the big losers.

Elise Beraru · Answer

Usually self-insured entrepreneurs are excluded from being able to file workers’ compensation claims. The exception is if their business is a corporation, and that need varies from state to state because some states don’t require a business carry workers’ compensation at all until they have a certain minimum number of employees. (For example, while California requires an business have workers’ compensation if they have even one part-time employee, Virginia doesn’t require coverage unless the employer has three employees.)

Workers Compensation Shop · Answer

Generally speaking the answer is yes. However than can depend on the state you are working in. However, if you a subcontractor for someone else, they will often require you to provide proof of coverage so they don't have to pay for coverage on you. Many independent contractors end up with a poor policy know as a ghost policy. This is a policy the covers the independent contactor as an entity, but excludes the owner. These policies run $1200 to $1500 annually and satisfy most general contractors' requirements.

John · Answer

The key question here is not the words you use to describe the workers, but rather your right to control and direct them in the performance of their duties and the manner in which the work is to be done. It is NOT the exercise of the right of control that is controlling, but rather the mere possession of the right of control. Let’s look at 2 other examples:

In the independently owned barber shop or beauty salon, the owner typically “rents” a chair to the barber or operator, either as flat amount or based on percent of sales. The barber often has his or her own tools and relies strictly on their own skill and experience. The customer is the operator’s customer, not the owner’s. Beyond “house rules,” the owner does not direct and control them in the performance of their work. No workers comp required.

In a restaurant, the servers are paid a base plus percent of tips. They must dress and interact with customers in accordance with management directives, likewise they are assigned tables by management. Customers belong to the restaurant, not the server. Workers comp is required. Many restaurants have attempted to style their wait staff as independent contractors, but, again and again, the courts haven’t gone along with it.

The courts refer to a huge collection of case law when deciding whether a person is an independent contractor or employee. It is complex and many factors come into play. But one thing is certain: no matter what you and your subs agree upon, it won’t change the law. Their status is determined by the law -NOT by you.

Your next move is to consult an attorney about where you go, from here.

Hope that helps.

Jeff Ashendorf · Answer

If they are self-employed (not an employee) then usually no. But check with your state, because it's a state-by-state requirement.

Carl Heintz · Answer

This depends upon the state rules. In many states, the answer is yes, unfortunately. They will be required to produce a Workers Comp Insurance Certificate to those that wish to engage them. Otherwise, the hiring party will have to pay workers comp on their services. We’ve run into this numerous times: the Workers Comp Insurance auditors are always trying to include any unincorporated entity in our policy…. they are relentless and ridiculous.

John · Answer

First job is to determine if the "self-employed contractors" REALLY are contractors as defined by the workers compensation law. Basically, if you have the right to control and direct the people in the performance of their work, and the manner in which the work is to be done, then they are EMPLOYEES within the meaning of the law. This cannot be changed by contract, employment agreement, or anything else. So, if they are employees, then you'll need workers compensation insurance to cover injury or sickness arising from their employment.

Otherwise, you'll need liability insurance, and maybe property insurance, depending on your business. You don't say what business you are in, so it is impossible to advise you until you disclose more.

EDIT: The OP has answered me , indicating, "I run a handyman company but the workers get paid direct by the client so I am a introduction agency as I book them the work."

A number of factors come into play here in terms of a worker's compensation exposure.
1. Do you hold yourself out as a responsible party to the customer in case the independent handyman screws up her work? 
2. Do you have a contract with the handypeople? Does it clearly define responsibilities, clearly define your role as an "introduction agency?" 
3. Do you, or will you, require proof of insurance carried by the handypeople?
4. Do you hold yourself out to the public as a handyperson service - or as a referral service? Or something else. That is, could a reasonable person think that you are responsible for the actions of the handypeople and the results of their work.
5. How are you compensated?
With the answers to these questions in hand, consult with an attorney who is skilled in worker's compensation law, and get an opinion.

If the attorney says you probably are not required to carry w/c, then get a policy anyway. For estimated payrolls of the handy people, the policy should say "if any." There probably will be NO payroll, and coverage will be issued at a minimum premium. In the event of an adverse judgement arising from a handyperson injury, you'll be covered.

If possible, use the same insurer for your liability as you do for the w/c. In case of a coverage dispute (is the claim w/c or is it liability?) then the same insurer will be on the hook, either way.

Your liability rates will be based on the classification of your work. If the insurance company agrees that you are a "temp agency," then you will be rated as such. Otherwise, if the handypeople are regarded as YOUR subcontractors, then you will be rated as a "general contractor," which could get pricey. But either way, if you are a small outfit (in terms of income) there will be probably be a "package policy" which costs you $250 to $500 annually, as a flat premium. Hartford and CNA both have such policies.

Hope that helps.