Does a Subcontractor Need Workers’ Compensation Insurance?

subcontractor plastering wall protected by workers comp insurance
Mordechai Kamenetsky
Last Updated: 
February 8, 2024

As a contractor hiring subcontractors, you may ask the question: "Does a subcontractor need workers' compensation insurance?" The answer is as follows: If you’re hiring a subcontractor, make sure that they have their own workers' compensation insurance. Without it, the subcontractor will be included in your policy, making you responsible for their premium payments and any injury claims they file.

On the other hand, if you're a subcontractor with no employees, you may not technically need workers' comp insurance unless the person hiring you requires it. However, it’s beneficial as it helps cover medical bills in case of a work-related injury. Of course, if you’re a subcontractor with employees, most states require you to have this insurance. 

Do Subcontractors require Workers' Compensation Insurance?

What is Workers' Compensation insurance?

Workers' compensation insurance protects employees in case they get hurt or sick on the job. It helps cover medical expenses, lost wages, and rehabilitation costs for employees who suffer from work-related injuries or illnesses. This insurance also protects employers from potential lawsuits by employees who may sue them for their work-related injuries or illnesses.

Who needs to have Workers' Compensation insurance?

In most states, workers' compensation insurance is a requirement for businesses with employees. State laws typically dictate which businesses need coverage and under what conditions. Some states require coverage for a business with just one employee, while others may have higher thresholds or specific exemptions for certain industries.

If you're a business owner, it's essential to check your state's Department of Labor to understand the specific workers' compensation insurance requirements for your company.

How does Workers’ Compensation insurance apply to subcontractors?

When it comes to subcontractors, the rules for workers' compensation insurance can be a bit more complex. Generally, subcontractors are considered independent business entities, which means they're not classified as employees and not automatically covered under the primary employer's policy.

If a subcontractor is truly an independent contractor and does not have any employees of their own, they are usually not required to have workers' compensation insurance. However, if a subcontractor has employees, most states require them to carry workers' comp insurance for those employees.

As a business owner, you should be aware that if a subcontractor doing work for your company doesn't have their own workers' comp coverage and gets injured while working for you, they can file a claim under your policy. In such a case, your insurance company could charge you as if the payments made to the subcontractor were wages to your own employees.

Kickstand Tip
Kickstand tip

To protect your business, make sure to verify that your subcontractors have their own workers' compensation coverage and that their policy is up-to-date before hiring them. Always have a written contract in place that clarifies the subcontractor's insurance responsibilities and includes proof of their insurance coverage.

Understanding Compliance and Risk Management

As a business owner or individual hiring subcontractors, it's crucial to understand the importance of compliance and risk management when it comes to workers' compensation insurance.

What are the legal consequences of non-compliance?

If you fail to comply with state laws regarding workers' compensation insurance, there could be serious consequences for your business. Penalties may include fines, stopping work on construction projects, and even facing legal fees if a subcontractor gets injured on the job without proper insurance coverage. Always make sure to verify your subcontractors have adequate insurance coverage, as required by your state's laws.

How can a contractor protect themselves when hiring subcontractors?

You can effectively manage risks with subcontractors by following these steps:

  1. Verify their workers' compensation insurance: Ask for a certificate of insurance as proof of workers' compensation coverage. This will minimize your liability for on-the-job injuries.
  2. Screen subcontractors: Perform background checks and verify licenses, experience, and references before hiring.
  3. Monitor job site safety: Regularly inspect job sites to ensure safety protocol compliance and identify potential hazards.

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What should be included in a subcontractor agreement?

A comprehensive subcontractor agreement is essential when hiring subcontractors. Here are a few key elements to include:

Scope of work

Scope of work: Outline the project's details, including the work to be completed, deadlines, and any necessary permits or approvals.

Payment terms

Payment terms: Specify payment schedules, invoicing requirements, and other relevant financial details.

Workers' compensation insurance

Workers' compensation insurance: Clearly state the requirement for subcontractors to carry workers' compensation coverage in compliance with state laws.


Indemnification: Include an indemnification clause to protect your business from potential legal claims arising from the subcontractor's work.

In conclusion, understanding compliance and risk management is critical for business owners hiring subcontractors. Ensuring proper insurance coverage and drafting comprehensive subcontractor agreements can minimize your legal exposure and help manage risks effectively.

Frequently Asked Questions

What are the consequences if my subcontractor isn't insured for workers' compensation?

If your subcontractor doesn't have the appropriate workers' compensation insurance, you may be held responsible for any work-related injuries or illnesses that occur. This could lead to financial costs and potentially legal implications for you as the general contractor.

How does a waiver form affect a subcontractor's workers' compensation requirements?

A waiver form can be used by subcontractors to exempt them from carrying workers' compensation insurance other than what is provided by the general contractor. However, not all states recognize these waivers, and even if they do, it is essential to carefully evaluate the potential risks and liabilities involved. It's always best to consult with an insurance professional to determine the right course of action.

What should I know about workers' compensation audits involving subcontractors?

Workers' compensation audits help ensure compliance with insurance policies and state regulations. During the audit process, the insurance company will review your subcontractors' insurance certificates to verify that they have the required workers' compensation coverage. Providing accurate and up-to-date information about your subcontractors will help avoid surprises and additional premium charges.

Experience the Kickstand Advantage

Do you want peace of mind when working with subcontractors? Let us be your workers' comp insurer and help you figure out your insurance policy. Call or text us at 886-338-8823 for a free consultation or fill out a form to get your instant quote on workers' compensation insurance today.

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Note: The information provided in this blog is intended for general informational purposes only and is not a substitute for professional legal or insurance advice. Laws and regulations regarding workers' compensation insurance are complex and vary by state and by specific circumstances. Therefore, readers are encouraged to consult with a qualified legal or insurance professional to obtain advice with respect to any particular issue or problem they might have.

Mordechai Kamenetsky

Mordechai Kamenetsky, co-founder and lead agent of Kickstand, is recognized as an expert in workers' compensation. He is passionate about helping small businesses manage risks and lower their workers' comp costs. In his articles, he educates readers and clients on the intricacies of workers' comp insurance.

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