Quick Guide to Workers’ Comp Insurance for Self-employed 2023
Nathan Weller is an Insurance Expert focusing on insurance for small business. He has 15 years experience in insurance operations, FNOL, and claims handling.
This article is part of a larger series on Workers' Compensation Insurance.
Workers’ comp insurance for self-employed is a policy business owners buy for themselves in case they’re injured while performing job duties. The policy pays for lost wages and related medical bills, allowing the self-employed business owner to keep their business afloat while recuperating.
Most self-employed contractors should strongly consider purchasing this policy. Simply Business, a leading small business insurance marketplace, lets you get a quote and buy self-employed workers’ comp online in minutes.
Is Workers’ Comp Insurance Required for Self-employed?
While state law typically mandates that employers get workers’ compensation insurance for their employees, coverage is usually optional for independent contractors, business owners, and self-employed individuals. Principals or owners sometimes will exclude themselves from coverage to save on premium costs or because they feel they don’t need the coverage.
Getting workers’ comp makes sense for solopreneurs if they are
- Working in a high-risk industry: Repetitive movements, exposure to chemicals, and manual labor are more likely to cause a workplace injury than clerical bookwork.
- Fulfilling state requirements: Coverage isn’t always optional for self-employed. In California, self-employed employees don’t have to purchase workers’ comp unless they’re a roofer, since it’s required.
- Meeting contractual obligations: Businesses will often only work with independent contractors if they have workers’ comp coverage and will include proof of insurance as part of the bid process.
- Operating solo-run businesses: If someone runs a business with no other employees, an injury to them means all operations are shut down. Workers’ comp policy can help generate lost wages.
Do I Need Workers’ Compensation Insurance for Contractors?
When it comes to requiring workers’ compensation insurance for contractors, every state varies in terms of the following:
- Whether you need to provide workers’ comp for your employees.
- The minimum number of employees that prompt workers’ comp requirements.
- The industries and worker types that can be excluded.
Even if you don’t fall under the requirements for your state, you should still purchase workers’ comp insurance because, for most policies, part of the coverage includes employer liability, which covers legal defense and damage costs if you’re sued for a work-related injury, illness, or death.
Claiming an employee is an independent contractor is a bad idea because misclassifying workers can lead to you paying fines and making up for back taxes and unpaid salaries. Read our guide on the difference between W-2 vs 1099 workers so that you can classify your staff accordingly.
State & Workers’ Compensation Markets
Note that every state’s workers’ compensation market is different. For example, states like North Dakota, Ohio, Washington, and Wyoming have what’s known as monopolistic funds where it’s all managed through the state. Others have a competitive marketplace that allows businesses to purchase coverage through private carriers.
While monopolistic states handle work comp for injuries, illness, death, medical expenses, and lost wages, they don’t include employer’s liability coverage to pay the costs of lawsuits, damages, and settlements in the event an employee sues. Businesses in these states should consider purchasing stop gap coverage to fill in the liability component.
Best Self-employed Workers’ Compensation Insurance Carriers
- Simply Business: Best Overall Provider for Self-Employed Workers’ Comp
- The Hartford: Best for Independent Contractors
- Thimble: Best for Fast Quotes
- Employers: Best for Claims Services
- CoverWallet: Best for Saving Money
Simply Business: Best Overall Provider
Online insurance brokerage Simply Business works with top-rated carriers to help you find the right coverage for workers comp or other essential policies your business needs. While many providers target SMBs, Simply Business’s appetite is for small companies with five or fewer employees, especially sole proprietors. After entering information about your business, it’ll generate real-time quotes from other providers which you can then compare and purchase online.
After answering several questions, we received a quote for workers’ comp for a sole proprietor painting business. It was through biBERK for $89.91 for nine months and $142.80 due on the day of purchase. The policy included employers’ liability and limits of $100,000 per accident, $100,000 per disease, and a $500,000 limit for the policy with zero deductible. You can purchase the policy online or call and speak with a licensed agent to finish the process.
Simply Business offers two types of workers’ comp for sole proprietors.
- Solo I is a specially designed workers’ comp for sole proprietors, limited liability companies (LLCs), partnerships, and S corporations (S-corps) with no employees. It includes the full set of workers’ comp benefits that are required in your state.
- Solo X is sometimes called a ghost workers’ comp policy. This is a policy that will effectively satisfy any workers’ comp requirements for a project but doesn’t provide any benefits other than a certificate of insurance (COI).
Simply Business makes it easy for you to manage your policy, no matter how many you purchase. You can change coverage, pay your bill, and request a certificate of insurance online.
If you need to speak with anyone in person, it is only available on weekdays. Its hours are Monday through Friday, 8 a.m. to 8 p.m. Eastern time.
Simply Business is well-reviewed by users. On the independent review site Trustpilot, Simply Business has an average score of 4.7 out of 5 by 500 reviewers.
In addition to working with top-rated carriers like biBERK (A++ Superior), it’s owned by Travelers. Travelers has a rating of A++ (Superior) by AM Best.
The Hartford: Best for Independent Contractors
Whether you’re a self-employed business owner or work as an independent contractor, The Hartford offers workers’ comp to fit your business needs. It also has superior customer and claims services like a 24/7 call center, a specialized workers’ comp claims team, and nurse case managers to help you return to work.
When you apply for a quote, it will ask specific questions about your business, and depending on your answer, it will narrow the focus to the right type of coverage for your needs. In the end, it will either generate a quote for you to work with or request that you call to finish the process. When researching this article, we were unable to finish the process, and it requested we call to finalize the quote.
The available coverage limits available for independent contractors range from $100,000 to $1 million per accident, $500,000 to $1 million per policy, and $100,000 to $1 million per employee.
The Hartford makes it easy to manage your policy or file claims: you can do it online or by calling 24/7. Through your online account, you can request a COI.
It offers XactPAY®, its pay-as-you-go service that is linked to your payroll. It’s available to all customers, regardless of the business size, including the self-employed. It also doesn’t require any upfront deposit.
There are several other convenient features, including construction contract management review, risk engineering to help reduce losses and improve safety, and nurse case managers who can provide medical advice.
The Hartford has a strong financial position. It has an AM Best rating of A+ (Superior).
Thimble: Best for Fast Quotes
Thimble offers quotes in 60 seconds or less for more lines of business, including workers’ comp. Once you receive the quote, you can review and change coverage and then purchase it online without speaking to anyone. For self-employed owners wanting very fast quotes but also quality claim services, like a managed care team or a return to work program, Thimble is the best option.
After answering a few questions, we received a fast quote for $1,662 annually. Alternatively, you could pay $148.50 monthly. The quoted policy had $1 million per injury, employee, and policy. There is an option to adjust the limits.
You can also get same-day coverage for most types of policies. However, while you can get a quote for that coverage and purchase the policy entirely online, coverage for workers’ comp doesn’t begin for four days after purchasing it.
Thimble is well-reviewed by its customers. With more than 1,000 reviews, it has 4.6 out of 5 stars on Trustpilot.
Its strength is in its quick, digital experience. You can get a quote on the app or online. You can also manage your policy and claims online or on the app.
Thimble is a managing general agent (MGA) that places you with multiple companies. The workers’ comp quote we received was underwritten by Employers Insurance Group, which has a rating of A- (Excellent) from AM Best.
Employers: Best for Claims Services
Employers is a provider specializing in workers’ comp, including the self-employed. It has developed a number of claim and customer service options that improve the policyholder and claim experience. These include its return-to-work program, a hotline for injured workers, pay-as-you-go billing, and managed care.
For a quote, you will need to contact Employers directly or reach out to a local agent. Its workers’ comp benefits include lost wages, medical treatment, and death benefits to the dependents. In nonmonopolistic states, employers liability is included in the policy too.
Its coverage is available in 46 states and Washington, D.C., and targets more than 30 low to medium-risk industries.
Since 1913, Employers have been helping businesses with workers’ comp. It offers PrecisePay® to use actual payroll figures and minimize audit variances. It currently works with more than 20 different payroll companies to make this feature widely available.
It offers four different payment options: 1) 100% down or 30% down with nine equal payments; 2) 20% down and nine payments; 3) 10% down with nine payments; and 4) 0% down and use PrecisePay®.
Employers also have a medical management team that includes a provider network and pharmacy benefits management to help minimize the cost while providing access to any necessary treatment. Also, Employers has a 24/7 hotline staffed by nurses available to all injured employees who have not received treatment to provide medical advice.
It should be noted that complaints filed with state departments of insurance, as monitored by the National Association of Insurance Commissioners (NAIC), are slightly higher than the national average for its worker comp claims.
Employers has a healthy financial position to handle claims. It has a rating of A- (Excellent) from AM Best.
CoverWallet: Best for Saving Money
CoverWallet is an online brokerage that offers advice on insurance and policy management to customers. When shopping for a policy, you can usually compare multiple quotes because it’ll return quotes for different prices from the same carrier. This makes it a great option for small businesses trying to save money on their workers’ compensation insurance. If the quotes don’t work, you can call and speak with a dedicated agent who’ll work to try to find additional options for your business.
You can learn more about the provider in our in-depth CoverWallet review.
After answering some questions about the business and risks associated, we received a quote for workers’ comp for $5,206 annually. The policy carried limits of $100,000 per injury, per employee, and $500,000 total per policy. If this quote didn’t work, we could call and speak with a dedicated agent. There’s an option to purchase the policy online, or you could call to discuss it further.
CoverWallet offers insurance advice and an estimated cost for business owners trying to figure out what coverage they need. Answer a few questions about your business, and it will provide suggested costs and estimates for your industry and ZIP code.
Once you purchase a policy through it, you gain access to an online account management system, where you can change coverage, pay your bill, file a claim, and request a COI.
Customers reviewing it online have given it an overall favorable rating. On eKomi, it has a rating of 4.7 out of 5 stars from over 700 reviews.
It works with multiple top-rated carriers. The quote we received was from Berkshire Hathaway Guard, which has an AM Best rating of A+ (Superior). CoverWallet is owned by Aon, which has a rating of A (Excellent) from AM Best.
Workers’ Comp Insurance Costs for Self-employed
Self-employed workers’ compensation costs are based on your state, annual payroll claims history, and job classifications. The job classification represents the risks involved in your daily work. Each gets a base rate, typically assigned by a rating bureau like the National Council on Compensation Insurance (NCCI).
Sample Self-employed Workers’ Comp Rate by Class Code & State
Class Code | Florida | Texas | California |
|---|---|---|---|
0042 Landscaper | $5.83 | $1.45 | $4.99 |
5474 Painting Contractor | $6.55 | $1.18 | $7.51 |
8810 Clerical Office Work | 15 cents | 4 cents | 22 cents |
5551 / 5552 Roofing Contractor | $10.57 | $3.53 | $20.37 |
8742 Sales Professional | 29 cents | 8 cents | 32 cents |
In addition to class codes, two other factors involved in calculating the total annual workers’ comp premiums are:
- Payroll: This is the amount you page in wages/salaries to others for each job classification code.
- Experience modification rate (EMR): Your experience modifier, or e-mod, is a number that represents your claims history. More claims raise your e-mod, which in turn increases your premium.
The resulting rate is often called your manual rate–the one insurers quote before they account for fees, taxes, surcharges, and discounts. Many insurers also charge minimum premiums for workers’ comp, even for a self-employed individual with no employees. Keep in mind, each carrier has its own way of evaluating your claims history, so quotes can still vary from insurer to insurer.
How Job Classifications Work for Self-employed Individuals
The NCCI considers the actual job duties of the worker. This means job classifications are usually based on the fundamental and most risky duties of a job, and not on the actual work they may do as a business owner, like bookkeeping.
For example, a self-employed landscaper hires a clerk to assist with administrative work like appointment setting. The clerk will be classified as an office worker using the code 8810, while the business owner would classify themselves as a 0042 class code for landscaping services.
From the above example, the two classifications with their respective total payrolls and the company’s EMR would be listed on the policy and used to calculate the manual rate. Once you take into account carrier-specific charges and minimum premium requirements, you can get the full estimated premium amount.
How To Opt-out of Self-employed Workers’ Compensation
Generally speaking, self-employed individuals, business owners, independent contractors, freelancers, and executives don’t need workers’ comp for themselves unless stipulated in a contract requirement or in specific instances, required by state law. However, some states require self-employed workers to file a waiver with the workers’ compensation board indicating they’re opting out.
In some circumstances, independent contractors may need workers’ comp waivers when they’re providing services to another business. Some states require the business owner to be responsible for providing workers’ comp for independent contractors.
In these cases, business owners can sometimes ask independent contractors to waive the requirement by filing paperwork with the state board. Every state is different, so make sure to check with your specific state’s governing entity for specific requirements.
Frequently Asked Questions (FAQs)
Yes. Health insurance and disability coverage regularly have exclusions for work-related injuries. Health insurance also doesn’t provide wage replacement if you’re unable to collect your salary because of a work-related injury.
The premium you pay for workers’ comp is based on your estimated payroll. Because the payroll will likely fluctuate, perhaps if there are some layoffs or additional employees are hired, providers conduct a workers’ comp audit at the end of the policy term. If your payroll was higher than estimated, you get a bill for the difference. If it’s less than estimated, you receive a refund.
It’s important to check with your regulatory board to determine if you meet the classification of an independent contractor. If you are, then on smaller projects, general contractors may cover you or may require you to purchase your own. On larger projects, the general contractor may have a contractor-controlled insurance program that provides workers’ comp and general liability for businesses and individuals associated with the project.
No, preexisting conditions do not prevent employers from obtaining workers’ comp insurance for themselves or their employees. Policies only pay for new injuries and illnesses or flare-ups resulting from existing work.
A member of a single-member LLC still counts as a business owner for workers’ comp purposes. Therefore, it is likely not required by their state to obtain it, but it’s still a good idea to have it because of the coverage it provides and if a contract requires it.
Bottom Line
Workers’ compensation for self-employed individuals is an optional but often recommended coverage. Just because you’re the owner of the company doesn’t mean you aren’t susceptible to injury. Buying a policy provides you with medical and partial wage coverage if you’re unable to work after an injury. If you have contract requirements, work in a high-risk profession, or are solo-operated, you should purchase workers’ comp for yourself due to its coverage benefits.
