Contractors are frequent insurance clients, as they face a wide range of risks and generally require levels of insurance to complete certain jobs. On area of confusion for contractors when it comes to insurance is workers compensation. Some contractors may need it while others believe they don’t, and things grow complicated when subcontractors are involved.
State Required Workers Compensation for Contractors
Independent contractors are generally excluded from workers compensation requirements when it comes to employment. For example, if an independent contractor is hired to work on a project, the business that hired the independent contractor is under no requirement to provide workers compensation insurance for that contractor.
Texas is the only state that does not legally require workers compensation insurance. The other states’ minimum employee requirements for workers compensation are below.
One Employee or More
Alaska, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New York, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Uta, Vermont, Washington, West Virginia, Wyoming.
Three Employees or More
Arkansas, Georgia, Michigan, New Mexico, North Carolina, Virginia, Wisconsin.
Four Employees or More
Florida, South Carolina.
Five Employees or More
Alabama, Mississippi, Missouri, Tennessee.
Keep in mind that there are different rules and exclusions per state when it comes to workers compensation insurance. Clients should be aware of the different regulations in their state. Contractors may have different requirements than another profession or industry, so no one client will have the same workers compensation policy.
Do Subcontractors Need Workers Compensation?
In general, subcontractors are not required to be covered under workers compensation. Keep in mind, however, that some subcontractors will not work without coverage.
Explaining Why Contractors Need Workers Compensation
Some contractors may be put off by paying more money for insurance, as most already need general liability or surety bonds in order to obtain licenses for projects. Unfortunately, since some employers and clients will not offer workers compensation, this leaves a contractor without coverage in case of an injury. Without insurance a contractor could look to pay expensive medical bills straight out of pocket.
Common Contractor Injuries
Injuries are common for contractors due to the physical nature of the job. Many contractors use heavy or dangerous equipment which can lead to injury, as well. The most common injuries that contractors suffer include:
- Broken bones
- Illness due to toxic chemical exposure
- Knee and ankle injuries such as breaks, sprains and strains
- Eye injury (including impairment or blindness)
- Neck, shoulder or back injury (often from lifting and moving heavy items or equipment)
- Spinal cord injury
Even the most experienced and careful contractor can suffer an injury when it comes to everyday work activity. Contractors should make sure they and their subcontractors are able to receive the care they need when they need it, without worrying about expensive medical bills.
The Repercussions of Not Carrying Workers Compensation
In some states, contractors can face penalties for not carrying workers compensation as required by law. In Arizona, contractors may pay a $1,000 penalty. Massachusetts contractors may have to pay $250 in civil finds per day or criminal fines up to $1,500. In extreme cases, not carrying workers compensation can result in jail time. This typically occurs in states where not carrying workers compensation is considered a punishable offense. In these states, such as New Jersey, contractors could face a fine up to $10,000 or jail time as long as 18 months.
This doesn’t include the possible financial repercussions. The average cost of a workers compensation claim is around $40,051. Claims can be even higher depending on the incident, such as motor vehicle related injuries. The average cost of a workers compensation claim involving a motor vehicle is around $78,293. Without a workers compensation policy, a contractor or other business could be looking to pay nearly this amount out of pocket.
How Much is Workers Compensation for Contractors?
Workers compensation prices vary primarily based on payroll or wages. In the case of a business providing contractors and subcontractors they hire with workers compensation, they may be responsible for paying workers compensation premiums.