Do Self-Employed Workers Have Compensation Insurance?

As a self-employed person, you enjoy many benefits that are not available to hourly workers. You can generally set your own schedule, you can work as much or as little as necessary and you can make executive business decisions. There are some drawbacks, however. While hourly employees are protected against work-related injuries and illnesses by workers' compensation insurance, which is mandatory in nearly every state, you may not have that same protection.

The Law

Generally, you are exempt from your state's workers' compensation requirements if you are self-employed. Even if you have employees who work for you who must be covered by a policy, you are generally exempt from coverage as a sole proprietor, partner or corporate officer. Therefore, it is certainly not a foregone conclusion that you, as a self-employed worker, have workers' compensation coverage.

Optional Coverage

Despite being exempt from a workers' compensation requirement, you can generally elect to purchase coverage for yourself on your business' policy. If an insurer is willing to insure your employees, it will not likely deny a request to include you as well. If you are an executive member of a corporation with no employees, speak with your agent about the best way to structure your policy. For insurance purposes, you might be classified as an officer or an employee of the corporation.

Check Your Policy

Coverage for yourself is not automatic, even if you have an existing policy for your business. Workers' compensation premiums are calculated primarily based on each covered person's annual income, so you must pay a certain percentage of your income on insurance premiums if you desire coverage. Check your policy if you are unsure whether or not you are covered by it. If you are not paying premiums for yourself, you have no coverage under the policy.

Reasons for Coverage

There are several good reasons to carry workers' compensation coverage for yourself even if you are not required by law to have it. Anyone, regardless of the nature of your work, can trip and fall while on the job, and workers' compensation pays for any resulting injuries or disabilities. There also may be business reasons for it. If you enter into a business relationship with another company, it may require you to carry certain insurance coverages, including workers' compensation. You may lose business opportunities if you do not carry coverage for yourself.