Workers Compensation for the Self-Employed

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What Workers Compensation for the Self-Employed is All About

Workers Compensation is a type of insurance that covers the lost wages and medical treatment for an employee that needs to take time off work due to a work-related injury. This coverage is given to those who have been injured in exchange for their relinquishment of the right to sue an employer for getting injured while on the job. This type of insurance is most commonly used in an employer-employee relationship, but it is also utilized by those who are self-employed.

Workers Compensation for the self-employed is considered to be personal coverage for business owners and independent contractors. When investing in this insurance, a business owner or independent contractor can access wage replacement if they are injured while working. Wage replacement can cover both lost wages and revenue associated with a self-employed individual having to take time off work.

Without this insurance, a person who is self-employed may suffer disastrous financial consequences as they are not able to work and are not in an employer-employee relationship which could provide them with lost wages.

Many self-employed workers not only work for themselves but also contract with other businesses. If an independent contractor hurts themselves in the process of performing work for a business, they may wish to sue that company to cover the costs associated with lost wages and medical treatment. However, this can be a lengthy and costly endeavor. Therefore, investing in Workers Compensation to protect yourself in the event of injury while working with a business as an independent contractor can provide you with an easier course of action.

Workers Compensation for Self-Employed Contractors

Depending on the type of industry, specific laws and rules may be in place to protect those who are self-employed. The construction industry is the industry in which these kinds of laws and regulations are the most pronounced.

In the construction industry, there are several laws and rules which dictate safety protocols and procedures for how to carry out given tasks. There are significant risks for contractors working in the construction industry, but there are also substantial risks for contracting companies being held liable for injuries. When subcontracting work out, general construction agencies are held accountable and may not hire anyone without personal coverage. By investing in Workers Compensation, self-employed workers in the construction industry can protect themselves in the case of personal injury and have more access to subcontracting work.

Any industry in which independent contractors are performing tasks that require physical labor is at greater risk of personal injury. In these industries, Workers Compensation is particularly beneficial.

Obtaining Workers Compensation as a Self-Employed Contractor

It’s important to note that Workers Compensation is not always easy to obtain as a self-employed individual. Whether you are an independent contractor, freelancer or subcontractor, most private insurance companies will not see you as a worthwhile individual to cover. This is because the cost of covering one person is typically of little value to the insurance company. In most states where Workers Compensation coverage is mandatory for businesses, the mandate usually starts once a company hires a certain number of employees, or when that company employs individuals in high-risk jobs.

There are some ways that an independent contractor can obtain this type of policy.

One method is to check to see if your state has a state-sponsored Workers Compensation Fund. Many states with these funds allow self-employed contractors to apply for coverage under the fund.

Alternatively, you may want to check to see if your employer has misclassified your employment status. Reports have shown that 30% of companies misclassify their employees as independent contractors. This results in many self-employed contractors losing out on Workers Compensation coverage that their employer would otherwise owe them. Additionally, some states require companies to classify their subcontractors as employees for Worker’s Compensation purposes. Every state has slightly different laws for employee classification and Workers Compensation. It’s important for all self-employed contractors to check the laws in their state.

Generally speaking, it is challenging and sometimes impossible for an independent contractor or another type of self-employed worker to purchase Workers Compensation as an individual.

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