Self-Employed Workers' Compensation Options – the Cost of Managing Risk - Zupnick Associates

(by Elton Mwangi)

It would be unwise of independent contractors working in construction to not have self-employed workers’ compensation insurance.

The top causes of all construction accidents are called the fatal four. With falls leading the pack, the rest are electrocutions, being struck by objects, and getting caught between machinery.

Just the beginning of this month, on 4th March, a construction worker died after wooden trusses fell on him at a Michigan home construction site.

Because of how common accidents are at construction sites is the very reason why workers’ compensation is needed.

Self-Employed Workers’ Compensation Options

A self-employed person is a sole proprietor or independent contractor who reports self-employment earnings. They’re not employees since instead of filling out a W-2 form at the end of the tax year, they fill out a 1099 form.

Self-employed persons can include insurance agents, salespeople, actors, lawyers, writers, editors, investors, and tradespeople. Learn the most common self-employed workers’ compensation options: 

Independent Contractor Workers’ Compensation Insurance

An independent contractor refers to a self-employed individual or entity contracted to do work or offer services to another entity as a nonemployee. Therefore, independent contractors must pay their health insurance, social security, workers’ compensation, and other benefits.

They buy their workers’ comp for various reasons:

Fulfill Contract Terms

Before working with independent contractors, some companies will require them to buy insurance, such as independent contractor workers’ comp. If a contractor gets injured at work, it limits the company’s liability and the risk of being held financially responsible.

Protection against Lost Wages and Medical Bills

Most health insurance policies exclude coverage for injuries and illnesses related to work. Thus, an independent contractor workers’ comp insurance will pay your medical bills if you get injured on the job. Workers’ comp will also replace the wages you lose when recovering from illness or injury. 

Sole Proprietor Workers’ Compensation Insurance

A sole proprietor without employees needs not buy workers’ comp insurance. But worker’s compensation would be beneficial if they get injured at work to pay for medical expenses and lost income. Health insurance won’t cover on-the-job accidents, remember?

If sole proprietors work in fields synonymous with injuries, like construction and roofing, companies may require them to purchase workers’ comp insurance. Businesses want to limit their liability if you get injured, so they’ll need a certificate of insurance as proof.

But if you have one or more employees, you’re legally required to buy workers’ comp insurance, and state laws govern you.

Penalties for Not Carrying Self-employed Workers’ Compensation Insurance

Each state has its laws governing workers’ comp, including penalties for failure to carry workers’ comp insurance.

For instance, you can face a civil penalty of $1,000 in Arizona, while Massachusetts’ civil fines are up to $250 a day, maximum criminal fines of $1,500, and a jail term.

In New Jersey, you can face a fine of $10,000 or a maximum jail term of 18 months, while New York charges a maximum fine of $2,000 per 10-day period of non-compliance. 

How to Get Self-employed Workers’ Compensation Insurance

While high-risk jobs requiring physical labor may demand workers’ compensation from independent contractors, even freelance writers can be required to carry the insurance as a condition of the contract.

However, it can be challenging to acquire workers’ comp insurance as self-employed individuals since large insurance companies might not find it profitable to sell small insurance policies. Therefore, look for smaller insurance companies willing to sell the coverage to you. They’ll base the cost on the type of profession.

What’s more, if you can’t find a willing private insurer, seek out worker’s compensation funds offered by most states. They’re called insurers of last resort.

Good examples are Massachusetts’ Workers’ Compensation Trust Fund, California’s State Compensation Insurance Fund, and New York State Insurance Fund.



Independent contractors and sole proprietors are eligible for self-employed workers’ compensation options that help them cater to medical costs and replace lost income after an injury or illness; health insurance just won’t cut it.

Get workers’ comp insurance for high-risk jobs like roofing and as per requirements of a contract. Otherwise, you’re not required to have workers’ comp unless you have one or more employees. Penalties for non-compliance vary by state.

Since finding an insurer who offers workers’ compensation for self-employed professionals can be difficult, working with an insurance broker – Zupnick and Associates – can be less tasking.

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