Workers’ Compensation for the Self-Employed Cost
Workers’ compensation insurance is an essential and often mandatory coverage for most businesses, but it is often overlooked for the self-employed. Workers might assume that obtaining such a policy is unnecessary since they are covered by whoever is paying for their services, but that is often not the case. Most employer workers’ compensation policies only include a company’s employees, meaning the self-employed independent contractor or freelancer doing work for the company is excluded. So what recourse do you have if you are injured while on the job? You can sue for lost wages and medical expenses, but you are responsible for legal expenses and, even if you win, it will take a long time to receive any payment. The majority of workers do not have enough disposable income to cover legal, medical, and all other expenses while also being unable to work. The best way to protect yourself from such a scenario is with workers' compensation for the self-employed.
This guide will ensure you have all the information you need about workers' compensation for the self-employed costs to choose the best policy.
We Cover in This Guide
- How much does workers' compensation for the self-employed cost?
- What is workers' compensation for the self-employed?
- What does workers' compensation for the self-employed cover?
- What does workers' compensation for the self-employed not cover?
- Who needs workers' compensation for the self-employed?
- Benefits and risks
- Tips for buying
How Much Does Workers' Compensation for the Self-Employed Cost?
Workers' compensation for the self-employed cost varies depending on factors including your state, annual earnings or reported income for self-employed, claims history, and job classification. The equation for determining your rate is as follows: each state provides a base rate for different job classifications and that number is multiplied by your total earnings. The base rates vary significantly depending on the state and the risks of the job. For example, office workers in Virginia have a base rate of 8 cents per $100 in earnings, while those in California have a 28 cent base rate; and roofing contractors in Virginia are $12, while those in California are $23. If you are a roofing contractor in California making $50,000 per year, workers' compensation for the self-employed cost will be at least $11,500 per year; while rates for officer workers in Virginia with the same level of income start at $40 per year.
What Is Workers' Compensation for the Self-Employed?
Workers’ compensation for the self-employed is a policy for those who perform a job or service for businesses, but who are not employees and are thus exempted from those business’ workmen’ comp insurance policies. That means that if they are injured or become ill while working, they are personally responsible for medical bills and will not receive any payment for lost wages. Workers’ compensation for the self-employed will pay for medical expenses and cover lost income until they are able to return to work.
What Does Workers' Compensation for the Self-Employed Cover?
Workers’ compensation for the self-employed covers any number of risks that fall into the following categories.
- Medical expenses for illness and injury caused by on-the-job accidents
- Occupational illnesses
- Repetitive stress injuries
- Workplace violence
- Stress-related mental injuries
- Death benefits for employees’ dependents
- Rehabilitation services and retraining programs
What Does Workers' Compensation for the Self-Employed Not Cover?
While workers’ compensation for the self-employed covers most potential risks, there are certain scenarios that are not included in most policies. Some examples are:
- Injury and illness incurred while not working
- Self-inflicted injuries
- Injuries resulting from conduct that violates policies
- Permanent and stationary injuries
You can sometimes get protection from these potential claims by adding additional coverage to your policy.
Who Needs Workers' Compensation for the Self-Employed?
While any worker has the potential of getting injured or ill while on the job, certain industries put people at higher risk than others. Workers that perform manual labor, put themselves in dangerous situations, engage in repetitive movements, or are exposed to chemicals need workers’ compensation for the self-employed. Those performing these types of jobs not only have a higher probability of being injured, the potential damage is much more significant and could result in high medical costs or significant lost wages.
Benefits and Risks
Workers’ compensation for the self-employed offers various benefits to cover risks, including:
- State Compliance: Certain states legally mandate workers’ compensation coverage to perform services when you have employees. Self-employed individuals are often exempt from this requirement. Double check with your state offices if you are unsure.
- Contractual Obligations: Often businesses will only employ those with their own workers’ compensation coverage. Example: Construction companies hiring subcontractors.
- Protect Yourself: Getting sick or injured while self-employed is very harmful. Not only are you personally responsible for your medical bills, you could lose a significant amount of income while you are recovering. This could wipe out your personal savings. Workers’ compensation will cover medical expenses and lost wages, and potentially prevent personal bankruptcy.
Tips for Buying
When considering workers’ compensation for the self-employed costs, keep the following in mind before making your decision:
- Work with an independent agent: An independent insurance agent will help direct you toward providers that have the most experience in your industry.
- Understand requirements: Be sure to analyze the regulations of the state where you operate and the terms of your contract to make sure your coverage will make you legally and contractually compliant.
- Compare quotes: Policy costs vary between insurance providers. Consider at least three quotes to find the best rates and coverage.
Getting workers’ compensation insurance can be more difficult for individuals and the self-employed. Some states offer alternatives for coverage that you should check if you fall into this category.
I have health insurance, do I need workers’ compensation for the self-employed?
Yes. Health insurance policies often do not cover work-related events, and when they do, the deductibles can be extremely high. Additionally, they do not provide any money for lost income.
Can I get workers’ compensation for the self-employed if I have pre-existing conditions?
Having a pre-existing condition does not prevent you from getting coverage. Workers’ compensation insurance covers any new injury or illness that occurs during work.
Will a general contractor provide workers’ compensation to subcontractors?
Some general contractors provide workers’ compensation insurance for small projects, others do not, and will only hire those with their own coverage.
Workers’ compensation for the self-employed is an important insurance policy that provides essential protection in the event that you incur an illness or injury while working for another company without an employee-employer contract.
By understanding workers’ compensation for the self-employed cost and determining your needs based on the services you provide, you can know that your policy covers potential risks and feel secure that even if you cannot work for a period of time, your business will survive.
The typical cost of workers’ compensation for the self-employed is $20 per month. Rates vary significantly depending on your location, earnings, claims history, and job classification.