Why does your client want you to have workers' compensation insurance?
Many IT consultants start their own business because they want to avoid the unnecessary bureaucracy of working in a large organization. As an independent contractor, you may have more freedom, but you also may have to meet your clients halfway on a few issues, including workers' compensation insurance.
Some clients, not all, require IT contractors to carry their own workers' compensation insurance. Why? As part of their risk management, big companies often require contractors to have basic business insurance – and workers' comp may get lumped into these requirements.
Workers' comp 101 for small IT businesses
Before we go over how you meet these IT contractor insurance requirements, it may be helpful to give a quick definition of workers' compensation insurance. This coverage, also called workers' comp or workman's comp, can help cover the following costs.
When an employee is injured during a work-related task, workers' comp may pay for medical treatment and costs. Work-related illnesses (e.g., chemical exposure) may also be covered.
While an employee is unable to work, workers' comp can cover their lost income during recovery.
Workers' comp can also include coverage for lawsuits, paying for a company's legal expenses if an employee sues over an injury.
In short, workers' compensation insurance offers financial protection and businesses with this coverage might not have to pay out of pocket for unpredictable workplace accidents.
Clients requiring workers' comp for tech contractors – why?
It may seem strange that another company wants you to have insurance to cover your own workplace accidents. It likely has to do with a client wanting to cover its financial risk.
From a client perspective, they may want their contractors to have coverage because of the following considerations.
Many states require employers to have workers' comp for all employees. While you're technically not an employee, the client may feel it's better to avoid any legal ambiguity and ensure that everyone who works for the business is covered.
Clients may not want to add you to their workers' comp policy because it may result in higher premiums.
If you have workers' comp coverage, a client may feel you're less likely to sue them if you're injured during the course of your work.
Your clients may lay out any workers' compensation insurance requirements in their contracts.
Workers' comp costs for small IT businesses
On our cost page for IT contractors, you can find cost estimates for workers' comp and other common coverages. Here's the gist:
- Workers' comp for IT contractors typically costs $352 to $643 in annual premiums (i.e., about $1 or $2 a day).
- The typical workman's comp policy offers $1 million in financial protection for workplace accidents.
- This policy should be sufficient to meet most client-contract requirements for workers' comp.
The good news: insurance for IT contractors costs less than coverage for other industries. As a sales / office worker, you typically pay one-fifth the cost of workers' comp compared to a maintenance or construction worker. If there's a silver lining to having to meet workers' comp insurance requirements, it's that.
How to get fast insurance quotes for workers' comp
If you're in a rush for workers' comp insurance (e.g., to sign a contract), you can use Insureon's online insurance application. You can get free quotes quickly and buy coverage online.
The app will ask for basic information about your business, including its:
- Projected revenue
- Number of employees
- Past insurance claims
At Insureon, we work with tens of thousands of IT professionals, so we know your industry. If you have a contact requirement, this streamlined application process makes it easy to get a certificate of workers' comp insurance ASAP to show a client that you have adequate coverage.