Although workers’ compensation is generally for employers to have for their employees it also covers you if you’re self-employed, such as an independent contractor. Just because you work for yourself doesn’t always mean workers’ compensation is optional for you. Almost every state requires that companies give workers’ compensation insurance to their employees. Each state has a list of companies and employees that need to be covered and a list of employees or owners that are exempt. So, if you run a business as a sole owner, your state may not require you to buy workers’ compensation insurance. However even if you’re not required by law to have coverage, your clients might.
Depending on your industry, clients may add it to their contract with you that you need to carry workers’ comp. For example general or subcontractors typically have to have workers’ compensation for someone to hire them to do work for them. This is because workers’ compensation policies typically don’t extend to any contractors you hire on temporarily. Most health insurance policies don’t cover accidents that happen at work. Let’s say you work for yourself and have health insurance. You hurt your back at work when you picked up a big box. If you got hurt at work, your health insurance might not pay for your hospital bills. This means that you have to pay for all the costs and fees connected to your injury.
If you work as a freelancer, the same thing will happen. Even if you have health insurance, you should still have workers’ comp coverage. It can help you avoid a situation that will ruin your finances. You may also need it if you hire freelancers or independent contractors for specific projects.
Self-Employed Workers’ Compensation
It might seem strange to buy workers’ compensation for yourself, but it happens all the time. Many companies won’t hire you as a self-employed worker unless you have workers’ compensation insurance. This is because, if you get hurt on the job, you might be able to sue the company to pay for your medical bills. Even though you’re an independent contractor, businesses know that the courts will probably order them to pay. Unless they buy workers’ compensation for you or you have it for yourself. A company can legally refuse to hire a self-employed worker who doesn’t have sufficient workers’ compensation insurance.
If you are self-employed as a sole owner and get paid through a 1099 instead of a W-2, you might not have to get workers’ compensation insurance. People often think that you only need workers’ compensation if you have people working for you. But that’s just not true for some kinds of businesses.
Why Independent Contractors Need Workers’ Compensation
Most state rules don’t require independent contractors to have workers’ compensation insurance. But you may still need to buy this policy for a few reasons.
1. Clients Require It
Your clients may want you to have workers’ compensation and other types of small business insurance to protect them from danger. If you get hurt at work, they could be held accountable and have to pay for your medical bills. By asking you to have workers’ comp insurance, they know that if you get hurt on the job, they will be financially protected. When you buy a workers’ compensation package, your clients save money because they don’t have to pay for your protection. But make sure you’ve taken that cost into account when you set your fees.
2. Unexpected Injuries
You could get hurt at work even if you don’t do any hard work. A software worker could get carpal tunnel syndrome from years of typing on a keyboard. Working inside a computer, a person who fixes computers could cut their hand and be out of work until it heals. Workers’ compensation pays for medical care when you get hurt on the job, even if it’s because you tripped in your office. This includes going to the doctor, getting medicine, and going to physical therapy. If you get hurt at work and have to take time off, workers’ comp will pay you some of the money you would have made.
This may seem like something that would be covered by health insurance. But insurers can turn down claims for accidents that happen at work. Medical bills can also add up quickly. And if your employee takes a long time to get better, workers’ compensation payments can save your business. So, even when it’s not required, independent contractors and single proprietors may choose to buy this coverage for themselves.
3. The Law
Outside of the construction business, most state laws do not require independent contractors or self-employed owners to have workers’ compensation. States have strict rules about who can be an independent contractor, and companies who misclassify their workers could get in trouble. Even if you call yourself a “freelancer,” you might still have to carry workers’ compensation if you’re really an employee. This is the responsibility of the employer, and most states let one-person businesses choose not to have workers’ compensation benefits.
However, if you are required to have insurance for yourself or your employees and you don’t buy a policy, you could be fined significantly or be held responsible for their medical bills if they get hurt on the job. It’s important to learn about the rules in your state about workers’ compensation. Some states require protection for every kind of employee connection. Including 1099 employees, independent contractors, full-time and part-time employees, and freelancers.
In some states, you can get out of having to get workers’ compensation if you are a sole proprietor. A workers’ compensation exemption is a statement that you don’t need insurance because you don’t have any employees. For example, you can’t renew your general contractor license in California unless you have proof of coverage or a valid waiver for sole proprietors. To get a workers’ comp exemption for a sole proprietorship, you’ll need to fill out the right form for your state, take it to be notarized, and generally pay a small fee. You won’t have to pay for workers’ comp, but if you get hurt at work, you might have to pay out of pocket to cover your bills.
What If I Hire An Independent Contractor
When you hire your own contractors or subcontractors, you take on the responsibilities of a big employer. In some situations, like when an employer’s business has a lot of natural risks, it may make sense to require contractors and subcontractors to carry their own insurance so you don’t have to.
Your lawyer can help you decide if it’s a good idea to ask the people you’re doing business with for workers’ comp. They can tell you not only about the rules and laws where you live. But also how to change your job contract to include language that says coverage is required. Even if a worker has a 1099 status, like a 1099 contractor, the company is still responsible for paying any workers’ compensation claims. Legally, 1099 contractors only need workers’ compensation coverage if their boss requires them to have it. However, it may be in their best interest to carry a certificate of insurance to protect themselves and get contracts with future clients.
Other Self-Employed Insurance Options
While we’re talking about workers’ comp, it’s important to note that sole owners often need to buy other types of business insurance.
Liability insurance will protect you financially if someone sues you for damages after slipping and falling in your coffee shop or breaking an expensive vase while you’re cleaning a client’s home. General liability insurance also pays for slander claims. This kind of safety can be bought as a separate policy or as a part of a policy for a business owner.
Listen, everyone has flaws and makes mistakes. In this case, professional responsibility is helpful. It’s insurance that protects you if a client gets hurt because of a job you did for them or advice you gave them. It is also called errors and omissions insurance, which is a more popular name. Professional liability insurance covers cash losses in case of injury or damage. While general liability insurance covers injuries and damage to property.
In the business world, there are always physical risks like getting hurt or losing something. There are, however, risks that come with using technology that could hurt your business. Hacking and data leaks are just two examples. Hackers are very interested in the names and medical records of your customers that you store on company computers. In order for your business to quickly get back on its feet after a data breach or cyberattack, it is important that it has data breach or cyber liability insurance.
By mixing two types of coverage, a business owner’s policy (BOP) protects your small business from a wide range of claims. Its coverage includes both commercial general liability insurance and commercial property insurance. The “general liability” part of a BOP protects your business in case someone sues you or your company. General liability insurance protects you from lawsuits if something like a customer slipping on a wet floor, a faulty product damaging a client’s property. Or a claim that your goods or services hurt someone. It can also protect you from claims related to libel, slander, and some types of advertising.
The property part of a BOP helps protect your business’s buildings, tools, furniture, and stock. Whether you own them, rent them, or lease them. It helps pay to fix or replace things that were stolen, damaged, or destroyed while they were in your care. Even if they didn’t belong to you. It can also pay for things like rent, salary, and other bills while your property is being fixed or replaced after a fire or another covered loss.
Working With EZ
Being self-employed or a a freelancer gives you more freedom and a better mix between work and life. One downside is that you’ll have to take care of your own insurance. This is something you must do. If you don’t have the right insurance, an accident or emergency could put you out of money. So, people who work for themselves and don’t have insurance are taking a chance by not getting it. EZ can help, though! We can give you free, quick quotes on business insurance, and we can also help you find the best plans for you. Enter your zip code in the box below or call 877-670-3557 to talk to a qualified agent.
Health insurance is expensive. And frustrating. Especially if you’re someone who is self-employed and does not have any employees. Until recently, if you were in this boat, then you were stuck getting insurance on the individual ACA marketplace, which could be very expensive if you didn’t qualify for any subsidies. But now, thanks to a relatively new rule surrounding Association Health Plans, you have a way to get more affordable group health insurance even if you don’t employ anyone else, or are as casual and unincorporated as a handyman or tutor.
What are Association Health Plans?
Association Health Plans (AHPs) have existed for decades, and are basically a way for small businesses to get affordable healthcare. Even though they have the word “plan” in them, they are not healthcare plans. Instead, an AHP refers to a large group of small businesses and sole proprietors banding together to increase their insurance purchasing power.
The small businesses in an AHP may all be in the same industry or the same geographical location, but either way, they can use their combined size to get healthcare coverage as if they were one large employer. For an insurance company, the larger the pool of people they are insuring, the less of a risk it is – so they can charge less per person.
Once you join, AHPs function much like traditional insurance. You will get the familiar insurance card and will have access to the insurance company’s set network of healthcare providers. Premiums will be set the same way they are with all insurance plans – AHPs could, at one time, use a small group’s health status to decide how much to charge, but they are no longer allowed to do so. However, unlike ACA marketplace plans, with AHPs there are no metal tiers to choose from, and AHPs can also choose to be more flexible with their enrollment periods than ACA plans.
Working Owners
You don’t need to have a formal, incorporated business to be a “working owner”: you can do handyman work.
Up until 2018, only small businesses that had employees were able to join AHPs. But, following an executive order signed by President Trump in 2017 (and some legal battles over new AHP rules), people now defined as “working owners” can also join AHPs. These “working owners” can also get coverage for their spouses and dependents through AHPs.
When it comes to AHPs, a “working owner” is seen as someone who is both an employer (since employers are the ones who can become members of AHPs) and an employee who can use the AHPs insurance plan. And you don’t need to have a formal, incorporated business to be a “working owner”: you can do handyman work, teach piano, drive for a ridesharing company, or tutor students in your spare time. Even if you have a regular full-time job, but don’t have health insurance, you can join an AHP based on your “side hustle.” To become a member of an AHP, you simply have to be earning money from the work you are doing and meet oneof the following criteria:
Work for an average of 20 hours per week or 80 hours per month as a sole proprietor or self-employed person. You can spread these hours over multiple paid, self-employed activities
Earn as much as the cost of the plan coverage for the working owner and any other dependents added to the plan
The Disadvantage of AHPs
If you are a sole proprietor, or someone working at multiple unincorporated side jobs, and have been struggling to find affordable insurance, the possibility of being able to access group health rates can seem pretty exciting. But there are definitely critics of AHPs. Some claim that they weaken the entire ACA by drawing young, healthy people away from the marketplace, leaving older, sicker people to drive up prices.
AHP plans can base their premium rates on gender and other factors.
But even if the stability of the ACA marketplace doesn’t worry you, you might be concerned about the main disadvantage for those getting an AHP policy: AHPs don’t always provide full coverage. Under the new rules surrounding them, AHPs are now treated like large employer policies and, as such, they do not need to follow a lot of the rules of ACA plans. The premiums may be cheaper, but the savings sometimes come at a price: large employer policies (and AHP policies) do not need to cover the ten essential benefits that ACA plans need to cover.
AHP plans can also base their premium rates on age, gender, and industry. So, in addition to worrying about whether you’re getting the coverage you need, you also need to check into how each plan is priced and make sure you’re getting the best deal.
Health insurance can seem like a wild, wild world sometimes. So much to know, so many possibilities, and so many pros and cons. While you may be going it alone in your job, you don’t need to go it alone when searching for the right plan for you. EZ.Insure is here to help and will offer you your own knowledgeable agent who can help you sort through all of the noise. We’ll get you instant quotes for free, so get started with us today. Simply enter your zip code in the bar above, or to speak with an agent directly, call 888-350-1890.
