Do I Need Workers Comp If I Have No Employees?

As a business owner, you might wonder if you need workers comp if you have no employees. It sounds like a silly question, why would you need insurance for workers, if you don't have any? While the general rule is that you don't need workers' compensation insurance if you have no employees, there are exceptions. 

Here are 4 considerations to keep in mind:  

State Laws and Exceptions

Certain states have specific laws that may require you to carry workers' comp even if you don't employ others. Yes, I know that doesn't make sense! For example, in New Jersey, corporate officers must carry workers' compensation even if they do not hire any other employees (This requirement does not extend to LLC members). 

You can check your state's workers' comp requirements at WorkCompConsultant's State Rules Directory.

Contractual Obligations

Even if the law doesn't require it, many clients may require that you have workers' comp insurance to limit their liability. This is particularly true if you are a subcontractor looking to win contracts. 

Having workers' comp can be a deciding factor for clients when choosing who to hire, as it provides them with reassurance that they won't be held responsible for any injuries on the job.

Personal Injury Protection

Workers’ comp can be a valuable asset to business owners with no employees, offering protection not typically included in standard health insurance plans. It covers medical costs and lost wages in case of a work-related injury, ensuring your financial stability during recovery.

1099 Contractors

If you work with 1099 contractors rather than employees, you might assume that you’re not required to have workers’ comp since you have no “employees”. However, if these contractors don't have their own coverage, you could be liable for any injuries they sustain while working for you. 

To avoid this, ensure your 1099 workers have their own workers' comp policies, or consider structuring the relationship so they are effectively contracting directly with your clients and you're receiving a referral fee.

Can I qualify for a Workers' Comp Ghost Policy?

If you're a sole proprietor, independent contractor, or self-employed individual, you might be eligible for a workers' comp ghost policy. This type of policy is designed for those who need to show proof of insurance to secure contracts but don't need the full coverage that comes with a standard workers' comp policy.

It's important to note that a ghost policy does not provide personal coverage for injuries or lost income. It's purely for fulfilling contractual obligations that require proof of workers' comp insurance.

The Bottom Line

In summary, while you may not be legally required to have workers' comp if you have no employees, there are several scenarios where it's beneficial or even necessary. Consider the specific laws in your state, the nature of your contracts, your personal health coverage, and how you work with 1099 contractors. Each of these factors can influence whether or not you need workers' comp insurance.

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If you're still unsure about your workers' comp needs or you want to explore your options,  we can help. Don't leave yourself unprotected or miss out on potential contracts because of insurance requirements. 

To find out how much workers comp insurance will cost for your business, start an instant quote now and get a free, quick and no-obligation quote in less than 10 minutes.