TAKING CARE OF BUSINESS
The Small-Business Owner's Guide to Workers' Compensation Insurance

Chapter 4: Workers' Compensation vs. Health Insurance
Part 3: Do Freelancers & Independent Contractors Need Workers' Comp or Health Insurance?

After reading about the differences between Workers' Comp and health insurance, independent contractors and other "one-person shows" might be wondering about their insurance obligations.

In short, all independent contractors are required to carry health insurance — or else pay a fine — thanks to the stipulations of the ACA. Your Workers' Compensation obligation, on the other hand, isn't so cut and dry.

Here's what you need to know:

  • Most Workers' Comp laws pardon business owners. This means that if you are an independent contractor, freelancer, or another type of business owner with no employees, you are generally not legally required to carry Workers' Comp for yourself. However, there are exceptions. For example, California roofers with no employees are still required to carry coverage.
  • Most health insurance plans exclude work injuries and illnesses. This is definitely a gray area that requires a conversation with your health insurance provider. Most health insurance policies contain language that excludes coverage for occupational injuries and illnesses. But some policies say that coverage is only excluded when the injury or illness can be covered by a Workers' Comp policy — which is most of the time, unless you are an independent contractor. In some states, you may be covered under a client's Workers' Compensation policy because laws consider contractors to be employees. In other states, you are on your own. Be sure to talk with your insurance agent in order to understand your exposures.
  • Some states consider subcontractors employees. Perhaps you don't technically have employees, but you do occasionally hire out your work to a subcontractor or seasonal part-time help. In some states, these workers would be considered "employees" and necessitate Workers' Comp coverage. We can't stress enough how important it is to understand your state's laws!

In summary, independent contractors may be able to forgo Workers' Compensation Insurance, but they have to carry health insurance. Depending on where you live and the type of work you do, you may be on the hook for both types of coverage.

Next: Conclusion & References

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