Do I Need Workers' Compensation Insurance with no Employees?
From a legal standpoint, people who work for themselves and do not have W-2 employees are generally not required to purchase workers’ compensation. New Jersey specifically does not require this coverage for sole proprietors, however, you may want to consider the benefits in the event of a workplace injury. An important factor to consider is that while it may not be legally mandated by the state, clients and other companies may require you as their contractor to be insured prior to any business relations.
Workers’ Comp Covers What Health Insurance Doesn’t:
As a business owner, you are probably already covered under some sort of health insurance. However, this personal policy does not provide any coverage to you as a business. If you become hurt or injured on the job, your health insurance will do little to get you back on your feet. It may supplement some of the treatment costs, but it does not compare to the coverage offered by a workers’ compensation policy. Workers’ comp can cover all of medical costs associated with diagnosing and treating the injury or illness as well as providing disability wages for those who are unable to work. It can even cover the rehabilitation treatments necessary to get you back to work as soon as possible.
What if I Hire Subcontractors Instead of Employees?
Typically, an employee is someone who works for an employer consistently and permanently, and therefore receives a W-2 tax form. On the other hand, a subcontractor is a self-employed worker who is hired on an as needed basis by an employer, meaning they are responsible for their own 1099 tax forms. Some states, like New Jersey, categorize subcontractors as employees regardless of their tax status, so this is not a valid workaround to purchasing workers’ compensation. Failing to insure your employees with workers' compensation can result in fines up to $10,000 or a jail sentence of 18 months.
Protecting yourself and your business under workers’ compensation can be an important step in assuring the future of your business. It might even be necessary for those who work in high-risk industries such as construction, manufacturing or healthcare. Many consider workers’ compensation coverage to be well worth the investment as it guarantees medical assistance and financial protection against injuries or sickness occurring on the job. If you are in need of a new or updated workers' compensation policy, or simply just have questions; visit our website to get a quote, and we’ll help identify the best coverage for your business.