Workers' compensation insurance for contractors

Every state has its own workers' compensation laws, so whether you're legally required to have workers' comp depends on where you work. The number of employees, type of work, and business structure (such as LLC, partnership, or 1099 employee) can all impact state requirements.

In most states, contractors must provide workers' compensation for their employees, including full-time, part-time, and seasonal workers. In other states, you'll need workers' comp in order to get a contractor's license.

Here's a quick breakdown of the laws in a few states:

• California contractors must have workers' compensation even if they work alone, unless they qualify for an exemption.
• Pennsylvania contractors must insure all of their employees but are not required to have coverage for themselves.
• Georgia contractors only need to carry workers' comp when they have three or more employees.

States often have stricter requirements for contractors in the construction industry due to the high risk of injury. Roofing contractors in particular are sometimes required to buy workers' comp coverage, regardless of whether or not they have employees.

Even when contractors qualify for an exemption, they may choose to purchase workers' compensation coverage for the financial protection it offers.

Insurance providers will consider a number of factors when calculating your workers' comp premiums, including:

• Number of employees. The more employees you have, the bigger the risk of an employee injury and subsequent claim.
• Services provided by your business. Contractors who do riskier work, such as roofers, general contractors, and welders, may see higher premiums than contracting businesses with a lower risk profile, such as lawn care companies and janitorial services.
• Payroll and business revenue. Businesses that pay more wages and take in more revenue are associated with a higher rate of claims and pay more for coverage.
• Your claims history. A contractor who has filed a workers' comp claim in the past can expect higher rates than one with a clean history of claims.
• Where your business operates. Healthcare costs, litigation rates, court costs, and other local factors can influence how much you pay for workers' compensation coverage.

It's easy to find affordable workers' comp insurance with Insureon. Our easy online application lets you compare quotes from trusted insurance companies to find policies that fit your budget and your unique risks.

Other ways for contractors to save money on workers' comp include:

• Avoid accidents and insurance claims. Contractors can prevent employee injuries that lead to claims by focusing on workplace safety. That might include personal protective equipment (PPE), employee training, clutter reduction, or posted warning signs. A clean claims history keeps your premium low.
• Classify employees correctly. Assigning employees the correct class codes helps you avoid misclassification fines and ensures you're paying the right amount for coverage.
• Buy pay-as-you-go workers' comp. Businesses with fluctuating numbers of employees may benefit from pay-as-you-go coverage, which has a low upfront premium and lets you make payments based on actual payroll instead of an estimated payroll.
• Customize your coverage options. Choose lower limits or a higher deductible to reduce your rate, but make sure your employer's liability coverage is sufficient to cover a claim and that you can afford to pay the deductible in a crisis.

Insureon's licensed agents can help you find the right workers' comp policy for your business, whether you work as a sole proprietor, an independent contractor, or you hire employees or subcontractors.

Workers' compensation provides crucial protection against workplace injuries, but it doesn't cover every risk. Contractors should also consider:

• General liability insurance: This policy covers expenses related to third-party bodily injuries and property damage, along with personal injuries and advertising injuries.
• Business owner's policy (BOP): A BOP bundles general liability coverage and commercial property insurance at a lower price than buying the policies separately.
• Commercial auto insurance: If a company vehicle is involved in an accident, this policy will pay for medical bills, property damage, and legal fees. If you use your personal vehicle for business, you may need hired and non-owned auto insurance (HNOA) instead.
• Contractor’s tools and equipment insurance: This policy helps pay for the repair or replacement of a contractor's tools and equipment if they are lost, stolen, or damaged in transit or at a jobsite. It's also called inland marine insurance.
• Professional liability insurance: Also called errors and omissions insurance (E&O), this policy covers professional mistakes and oversights, such as a contractor missing a deadline for a project.
• Surety bonds: Your clients may require you to carry a bond, which acts as a financial guarantee that a project will be completed according to the terms of the contract.
• Builder’s risk insurance: This policy pays for damage to a structure still under construction and any materials at the site.
• Contractors pollution liability (CPL) insurance: Also called environmental insurance, this policy covers pollution liability risks for contractors and subcontractors.