Consulting work is not generally thought of as being high-risk. However, even in this field, workers’ compensation insurance is necessary. Do consultants need workers’ compensation insurance, though? Why is it important?
Is workers’ compensation insurance for consultants a requirement? That depends. The answer will vary depending on whether you are a self-employed consultant or operate a consulting business with employees.
If you have employees, then your state likely also requires you to carry workers’ compensation insurance, although there are exceptions, exemptions, and variances between the different states and what they require.
If you are a sole proprietor, freelancer, or otherwise offer your consulting services without other employees in the mix, you may not be legally required to purchase workers’ comp for consultants. That doesn’t mean you shouldn’t, though.
Whether you’re required by law or not, buying workers’ compensation for consultants should be a no-brainer. But why?
Workers’ compensation insurance for business professionals like consultants is important for three primary reasons:
It helps cover medical costs related to workplace injuries or diseases. This can include short-term, long-term, and rehabilitation-related costs. Don’t make the mistake of assuming your health insurance will cover it, either.
It provides some protection against lost wages. If you’re hurt and unable to work, you also cannot serve your clients. In most states, workers’ compensation insurance for consulting businesses will pay on average two-thirds of your normal earnings after you’ve been out five to seven days (note that the percentage and timeframe vary from state to state).
It provides death benefits for your spouse and dependents if you’re killed in a workplace accident or die due to a work-related injury or illness.
In most states, your spouse and dependents will receive two-thirds of your average salary up to a specific point. If your children are not full-time students, it ends at 18. Otherwise, most states mandate paying until they turn 23. Spouses usually receive compensation until they remarry, although there is often a time component, as well.
While consultants might not face the same risks as electricians, plumbers, or construction workers, there is still the chance of experiencing an on-the-job accident that leads to an injury or developing a job-related disease.
A slip-and-fall accident might seem like little more than an embarrassing interlude during your workday, but it can leave you in pain and unable to work.
Workers’ compensation for consultants is designed to make this situation more tenable so that you can recover from the injury without worrying about how you’ll pay those medical bills or deal with a lack of income.
Most consultants are at risk of developing job-related diseases over time. The best example is probably carpal tunnel syndrome, which affects up to 5% of the adult population in the US. In severe cases, carpal tunnel impacts your ability to work using your hands and can have lifelong ramifications.
First, it pays for emergency medical care costs. That includes things like ambulance trips, ER visits, and more.
It also pays for continuing medical care costs, so if you need to take medication, go through physical therapy/rehabilitation, or have follow-up appointments, it pays for those, too. Finally, it pays for at least a percentage of your lost wages during that recovery period.
It's really about peace of mind. You know that if something happens and you’re unable to serve your clients, your medical care costs and income are handled.
The case for workers’ compensation for insurance consultants is more obvious when we talk about consulting businesses rather than independent consultants.
In most states, businesses with employees must provide workers’ compensation insurance. That varies by state, as does the number of employees that triggers the law, so make sure you know what applies in your specific instance.
Within a business setting, professional liability and workers’ comp insurance for a consultant provide protection against healthcare liabilities and offer risk management.
For instance, suppose an employee is injured on the job but you don’t carry workers’ compensation insurance. They choose to file a lawsuit against your business, which means you could be held liable for not just the cost of their medical care and lost wages, but also court costs, legal fees, and attorney fees. Even if you carry business insurance for workplace injuries, there’s a good chance that your liability coverage has gaps.
There’s also the risk management side of things. As a consultant, you’re used to helping your clients look to the future, anticipate needs and changes, and bulletproof their businesses today. Don’t neglect to do that for your own business.
Yes, consulting is usually a low-risk industry. However, it’s always important to have viable protections in place. There’s no way to guarantee that you or an employee won’t be injured, and it only takes one instance to cause major repercussions. Workers’ comp coverage helps you reduce and manage those risks.
Anticipating the cost of workers’ comp insurance for consultants is important. However, it’s a complex process that involves many different variables. Some of them include:
One of the most important cost factors is the job class code applied to you and/or your employees. These are numeric codes devised by the National Council on Compensation Insurance (NCCI) that represent the level of risk for specific occupations.
Most consultants fall under code 8601 or 8742, but unless you’re a solo consultant or you only employ other consultants in your business, it won’t be the only job class code you need to worry about.
Every employee within your business must be classified correctly. Otherwise, misclassified employees could raise the cost of your workers’ compensation insurance.
Here’s an example. Suppose your receptionist is actually classified as part of your external sales team. Traveling salespeople incur much greater risks than someone who primarily sits behind a desk all day, so the costs of coverage are higher.
Worried that workers’ comp insurance will cost you a lot? It doesn’t have to. You’ll find many ways to help reduce the costs of your policy and still get the coverage that you (and your employees, if applicable) need for peace of mind and protection.
Because your anticipated payroll is such a big part of your workers’ comp insurance costs, it’s vital to ensure it’s accurate. If it’s not, you’ll end up paying the difference at the end of the term.
Audits can be stressful and costly. You can reduce both of those by keeping your payroll and insurance records organized and easily accessible.
Don’t just wait for an injured employee to recover enough to return to their previous job. Implementing a return-to-work program allows them to come back with lighter duties and fewer responsibilities, accelerating their healing and reducing the costs of workers’ comp.
Want to really reduce the costs of your workers’ comp insurance? Be safety conscious. Know and follow OSHA rules and regulations. Create an employee-led safety committee. Implement a safety training program for all employees within your business. Each step will reduce your risk, which ultimately reduces your insurance costs.
While something might seem like a minor incident, it can have major ramifications down the road. Report even small incidents so everything is documented. That way, you don’t have to worry that a claim is denied because proper procedure wasn’t followed or because of a lack of previous knowledge.
There’s no one perfect insurer for every consultant. Make sure you shop around to find the right deal, the right coverage, and the right overall fit.
Many consultants discover that buying workers’ comp insurance isn’t as simple as they anticipated. Some insurers don’t offer it. Others might only insure specific industries due to underwriting guidelines. Yet others might claim to offer low rates but fail when it comes to comprehensive coverage.
It’s important that you make an informed decision here and Kickstand can help. With just a few pieces of basic information about you and your business, one of our experts can create a custom quote and ensure that you’re able to maximize both financial savings and coverage.
With years of experience helping consultants just like you, we have developed the tools and resources necessary so you can understand what you’re buying, find the right coverage, and enjoy access to outstanding support and customer service.
Ready to get started? Workers’ comp isn’t something that should be put on the back burner. It’s time to protect your people and your business.