Do I Need Workers' Comp As a Business Owner?

October 23, 2019

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Almost every state requires that a business purchase workers' compensation insurance to cover on-the-job injuries to employees.

In most states, business owners are allowed to exempt themselves from the coverage, but even in these states, exceptions often apply to self-employed people or businesses that contract with other businesses.

Workers' Comp Required

Every state except Texas requires that any business with one or more employees must have workers' comp insurance. As a self-employed business owner, you need to have a policy in place before hiring that first non-owner employee. Workers' comp insurance pays the medical and rehabilitation bills for workers who are injured on the job. The insurance may also pay some missed wages if an employee cannot work due to the injury. The coverage requirements are set by each state.

Owner Employee Coverage

In most states the owner or owners of a business are allowed to opt out of covering themselves under the company's workers' comp plan. The rules about owner coverage can vary depending on whether the business is a sole proprietor, partnership, limited liability company or corporation. For a business owner workers' comp coverage is often optional; as the owner you can choose to cover yourself along with your employees or just cover the employees and save the cost of coverage on yourself.

When Owner Coverage Required

Even though state rules may allow a business owner to forgo workers' comp coverage for himself, exceptions exist. Many businesses that hire outside contractors require those contractors to have worker's comp coverage; that means your clients may require you to cover yourself if you perform work in their place of business. Some types of work require workers' comp coverage for a self-employed individual. For example, California requires self-employed roofers to buy coverage that includes the owner, because roofing is a hazardous occupation.

Assume Nothing

If you do not get workers' comp insurance when it is required, the penalties can add up fast and your business could be shut down. Just because business owners usually do not need to cover themselves, you cannot assume that the generality applies to you. If you have employees in your business, discuss your situation with the insurance agent providing the coverage for the rest of your company. If you are self-employed and a sole proprietor, check with your state concerning workers' comp insurance and your specific type of business.

Keeping you protected.




All Access Insurance in Littleton, CO,  who represents multiple insurance companies as a “Broker” and provides products for auto, home,  commercial, workers compensation, and much more! Call us today for a free quote at (303) 932-1700.