Is Workers’ Compensation Insurance Needed by a Sole Proprietor?

Being a sole proprietor of your business means you make all business-related decisions on your own. If you are a sole proprietor with no employees whatsoever, you are not required to purchase workers’ compensation insurance. However, getting this insurance can still be beneficial for you even if you have no employees. With workers’ compensation insurance, if you are injured on the job, your medical expenses and replacement wages will be paid by the insurance coverage while you recover.

Importance of Workers’ Compensation Insurance for Sole Proprietors

Even though you have no employees, there are certain things you still need to consider before deciding if you want to purchase workers’ compensation insurance or write it off. These include:

  • Your Clients: While you might have no need for it and aren’t required to legally purchase it, your client might request you to carry workers’ compensation insurance to limit their liability. As an independent contractor, you might get injured on the job, and clients prefer that the sole proprietors they hire have their own workers’ compensation insurance.
  • Hired Subcontractors: Every state has its own regulations regarding whether subcontractors will be considered as employees or not. If a subcontractor hired by you suffers job-related injuries, workers’ compensation insurance might be required if he is regarded as an employee by your state.
  • Non-W-2 Workers: You might have no full-time W-2 employees, but just like hired subcontractors, your state might regard these part-time or non-W-2 workers as employees. The hired worker could be legally considered as your employee if they do not offer the services they provide to you to the general public. This is why before hiring a contractor, you should have a meeting with their attorney and check the laws of your state to know whether they will be treated as employees and, if yes, what will be your workers’ comp obligations towards them.

As a sole proprietor, workers’ compensation insurance might not be the only type of insurance you need. Some other insurance policies that you might require are general liability insurance, commercial auto insurance, errors and omissions insurance ( also known as professional liability insurance), etc.

To further discuss the importance of workers’ compensation insurance for sole proprietors, you can contact your insurance agent. Be sure to compare different company quotes before settling on a policy. To protect your employees and yourself with the right workers’ comp coverage, call our experts at Pittman Insurance Group, LLC. We are available to discuss and clarify any questions you might have regarding workers’ compensation insurance. Contact us today!

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