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Do You Need Workers Compensation Insurance?

The requirement for workers' compensation insurance varies from state to state. In general, employers with one or more employees are required to carry workers' compensation insurance. However, there are some exceptions, such as:

  • Independent contractors: Independent contractors are not considered employees and are therefore not typically required to have workers' compensation insurance. However, there are some exceptions, such as if the independent contractor is working in a hazardous industry.

  • Sole proprietorships: Sole proprietors who do not have any employees are not required to have workers' compensation insurance.

  • Some small businesses: Some states have exemptions for small businesses with a limited number of employees.

If you are an employer, it is important to know whether you are required to carry workers' compensation insurance. But you should go beyond that and ask yourself what would happen if you choose not to purchase workers compensation insurance and you (the owner and sole employee) are injured.


Here are some of the benefits of having workers' compensation insurance:

  • It provides financial assistance to employees (including the owner) who are injured or become ill on the job. This includes payment for medical expenses, lost wages, and death benefits.

  • It protects employers from lawsuits filed by injured employees. In many states, if you only hire independent contractors and avoid the state requirement for workers compensation insurance, you are still held liable for the financial assistance to an independent contractor who is injured while working on your behalf. So if you don't have workers compensation insurance, those independent contractors can sue your business for the benefits that would have been paid under a workers compensation policy.

  • It can help to reduce the number of workplace accidents.

  • It can improve employee morale and productivity.

  • It provides peace of mind for the owner and their family in case the owner is injured. If you are your sole employee and the business is your main source of income, what other financial resources do you have if you are injured while working and have to close the business while you recover?

All insurance that you consider for your company is a business decision. Instead of just considering what you legally have to have, look at the impact on your business if you chose not to have workers compensation insurance and you or your employees are injured on the job.


Talk to an independent insurance agent to see what options there are for you and your business. Because they are independent, they most likely have multiple carriers that they can place your coverage with.

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