To give you a better understanding about what workers’ comp exemptions are, we’ll be discussing: 

• The professionals who may qualify for an exemption.
• Varying state laws in regards to exemptions.
• How to file for an exemption.
• The risks of opting out of.

Let’s take a look!

Common Workers’ Comp Exemptions

Workers’ compensation coverage is an essential type of commercial insurance, protecting employees against the costs involved with workplace injuries. While it is legally required in almost all 50 states, certain businesses and individuals are allowed to opt out. Doing so can help small businesses in particular save money, but also comes with some risks.

 Now let’s start by exploring the most common exemptions: 

Independent Contractors and Sole Proprietors 

Since sole proprietors and independent contractors work for themselves, they have no employees. Because of this fact, many states allow them to opt out of workers’ compensation requirements.

Corporate Officers and Owners 

High-level executives such as owners of large corporations and corporate officers oftentimes qualify for a workers’ comp exemption. It’s important to note that in this situation, the executive alone won’t receive workers’ compensations benefits, but normal employees are still required to. 

Family Members in Family-Owned Businesses 

In some states, immediate family members who work for a family business may be able to opt out of workers’ comp requirements. For example, a spouse or child who 

works for their family’s restaurant may be eligible for an

exemption in many cases. 

Seasonal or Casual Workers

For some professions, work tends to be short term depending on the industry, specific season, or special circumstances. Many states allow workers, who are  seasonal or temporary, to opt-out of workers’ compensation requirements. In these situations it’s important to read about the industry-specific requirements in addition to the state requirements. 

Agricultural Workers

In some states farm laborers and other agricultural workers can be exempt from workers’ comp requirements. Similarly to temporary workers, it’s important to read up on specific agricultural laws in your state to make sure you’re legally compliant. 

State-by-State Workers’ Comp Exemption Variations 

As briefly mentioned, each state has its own separate laws in regards to workers’ compensation requirements. While we won’t go through every state’s specific laws, you can find more detailed information by looking at our Workers’ Compensation Insurance Rates and Coverage by State overview.

Here are some examples of states with unique workers’ compensation laws: 

• Texas: Private employers don’t have to provide workers’ compensation coverage at all (they are the only state with this law).
• Florida: While construction workers usually face stricter requirements than in many other states, sole proprietors can apply for exemptions. 
• California: There are very few exemptions allowed. One of the only types of professionals who may become exempt with specific circumstances are corporate officers. 
• New York: While sole proprietors are exempt, many specific types of contractors must be covered. 
• Pennsylvania: Unless they employ other people, sole proprietors are exempt.

*It’s important to always check with your state’s labor and workers’ compensation board to fully understand the specific exemption requirements for your state and industry. 

How to File for a Workers’ Comp Exemption 

• Apply: After finding out if you and your business are eligible for workers’ comp exemptions, you’ll need to apply through your state’s labor department or workers’ compensations board. This is usually as easy as filling out a lengthy application, but sometimes requires a sworn affidavit.
• Required Documents: During the application process you’ll likely need to provide some specific documentation. Standard document requirements include proof of business ownership, proof of family relationships (for family-owned businesses), or proof of your independent contractor status. 
• Exemption Renewal: Most states require you to renew your workers’ compensation on a periodic basis. For some states, it’s every year, for others, it’s every couple of years, so be sure to check with your labor board for your local requirements. 

Risks of Obtaining a Workers’ Comp Exemption 

• Financial Risks: While opting out of your state’s workers’ compensation requirements could save you money upfront, you run the risk of facing expensive out-of-pocket costs if you or an employee gets injured on the job. 
• Legal Risks: If you fail to cover an employee who is in fact required to have workers’ compensation coverage you will face steep fines and/or other legal penalties. The same consequences apply if you incorrectly claim an exemption. 

If you are eligible for an exemption it’s important that you take the time to weigh your options. While we encourage you to play it safe and get some level of workers’ compensation for your business, it is a personal choice and each option has pros and cons. 

Why You May Want Workers’ Comp, Even if You Are Exempt

• High-Risk Professions: If you work in a high-risk industry such as construction, it’s likely worth it to obtain a workers’ compensation policy even if you’re not legally required. This is mainly because the risk of injury is so much higher in these professions in comparison to other ones. 
• Protect Your Assets: A workplace injury could result in a lawsuit costing hundreds of thousands of dollars without a workers’ compensation policy in place. In this dreadful situation, many business owners simply cannot afford to keep their company afloat, while also paying the settlement. 
• Employee Trust: Having a comprehensive workers’ compensation policy in place shows your employees that you truly care about their health and well-being. This helps to instill a sense of trust and loyalty among team members. 

Learn More About Your Options at EZ.Insure 

Workers’ compensation insurance is a crucial type of coverage that extends to employees by covering the costs associated with workplace accidents. While there are some benefits of opting out of your state’s requirements, it’s important to first weigh the pros and cons before making a decision. 

To learn more about workers compensation coverage and other key business protections, visit our full resource library. 

If you’re interested in taking the next step to cover your team, EZ.Insure also provides free quotes, and expert help from licensed insurance agents. To get started, simply fill out the form on the righthand side of the screen or call us at (855)-694-0047.

Your small business can benefit from many different kinds of commercial insurance, including policies like general liability, commercial property, and small group health coverage. One of the most important policies to add to that list is workers’ compensation insurance. 

With this type of policy, small business owners can protect their employees and themselves from the financial fallout of work-related injuries and illnesses. But do you actually need to carry this kind of coverage, or is it just good to have? Not only that, but how do you select the most appropriate workers’ compensation policy for

your business, and what steps should you take to

safeguard against worker’s compensation claims? 

What Is Workers’ Compensation?

First, let’s explain what workers’ compensation is. Workers’ compensation, or workers’ comp, is an insurance policy that provides financial support to workers who are injured or become ill on the job. Employees who become ill or injured on the job are entitled to workers’ compensation benefits, within certain parameters, regardless of who was at fault: the employee, the employer, a coworker, a customer, or anyone else.

What Injuries Does Workers’ Compensation Cover?

Injuries that occur on the job are covered by workers’ compensation insurance for companies of all sizes, and regardless of how they occurred (such as a fall from a ladder). To give another example, if a delivery driver is in an auto accident while working, they may be entitled to workers’ compensation benefits.

Workers’ comp will generally also cover illnesses that are caused by workplace conditions. The state’s definition of “work-related illness” can include things like occupational lung disease, which has been linked to things like chemicals on the job and airborne particles. But be aware that different states and fields have different sets of regulations.

In addition, in many cases, employees can claim workers’ comp benefits for repetitive strain injuries like carpal tunnel syndrome, or for chronic conditions like back pain that manifest after a long period of time.

Workers’ Compensation Laws by State

Every state has its own set of laws and regulations when it comes to workers’ compensation. Below we’ve highlighted the basics for each state. If you would like more information about your state’s workers’ compensation laws and available policies, check out our state-by-state guide.

Alabama

Alabama’s Workers’ Compensation Division is in charge of the state’s workers’ comp program. In Alabama, workers’ compensation insurance is mandatory for any business that regularly employs five or more people. In addition to being mandated by law, this coverage serves to safeguard both employees and the company.

Workers’ compensation not only benefits your employees by helping them pay for medical expenses and replacing a portion of their lost wages, but it also benefits you by shielding you from double payments, penalties, and fines, and by reducing your liability in the event of an accident on the job.

Alaska

Any company in Alaska with one or more employees must have workers’ comp coverage. The only exception is if you have been authorized to self-insure (i.e., pay workers’ comp claims as they arise out of your own pocket rather than maintaining an insurance policy). In Alaska, workers’ compensation insurance is obligatory for nearly all workers, but this rule does not apply to the following groups of employees:

• Part-time babysitters
• Non-commercial cleaning staff
• Employees hired to harvest crops, and other temporary or part-time workers
• Officials in amateur sporting events
• Contracted entertainers
• Employees who work in commercial fishing
• Taxi drivers who are employed under contracts
• People who are receiving state subsidies for temporary help while performing required employment tasks
• Players and coaches on professional hockey teams, so long as they have health insurance
• Real estate agents working under contract
• Drivers for transportation companies

Arizona

Arizona operates under a “no fault” system for workers’ compensation. Because of this, it doesn’t matter who or what caused an accident at work, an injured worker is always entitled to medical care and compensation. The Industrial Commission of Arizona (ICA) handles workers’ compensation claims. Since its inception in 1925, the ICA has grown to include two departments: Claims and Administrative Law Judges.

The claims division’s employees can help, but they can’t give you legal advice. You can ask them anything you like about workers’ comp laws and they’ll know the answer. Hearing requests are sent from the Claims Division to the ALJ’s Hearing Division. Claims disputes, employer disputes, and insurance company disputes are all dealt with by the ALJ department.

Arkansas

When it comes to making sure that workers’ compensation laws in Arkansas are followed, it’s up to the Arkansas Workers’ Compensation Commission. The Commission is responsible for keeping tabs on workers’ compensation claims and benefits paid out across the state.

To legally protect your staff, a workers’ compensation insurance policy (or state approval to act as a self-insurer) is a necessity. In addition, the cost of workers’ compensation insurance must be covered in its entirety by your business; employees should not be required to contribute in any way. Failure to comply with these laws may result in civil penalties and the loss of liability protections afforded by workers’ compensation insurance and state law.

California

If you have employees in California, you must follow the state’s workers’ compensation laws. There are three things that must be done in order for your company to be in compliance:

• Purchase workers’ compensation insurance to cover all required employees.
• Provide new hires with a workers’ compensation pamphlet or brochure.
• Put up a “Notice to Employees” poster around your workplace.

Additionally, it is illegal in the state of California to require employees to contribute to or offset the cost of workers’ compensation insurance. In contrast to health insurance and other benefits, there cannot be any payroll deductions required to provide coverage. In return, they generally can’t sue you if they get sick or hurt on the job.

Colorado

The Colorado Division of Workers’ Compensation (DOWC) administers the state’s workers’ compensation system, which was established by the Colorado Workers’ Compensation Act of 1915. Workers’ compensation insurance is obligatory in Colorado for nearly any company with employees. 

These cases are the exception to the rule:

• Self-employed
• Corporate officers
• Limited liability company members

Workers’ compensation is optional for these workers but is still available if desired.

Connecticut

Any Connecticut business with one or more employees is mandated by law to have workers’ comp coverage. One notable exception is that companies do not have to carry insurance for domestic workers who put in fewer than 26 hours per week. Workers’ compensation insurance is required by law for all other employees, whether they are part-time, full-time, or seasonal.

In addition, being a business owner, member of an LLC, corporate executive, sole proprietor, or independent contractor does not necessitate workers’ compensation coverage. But even if this is the case for you, you may want to consider purchasing workers’ comp insurance because of the high cost of medical care. Workers’ compensation policies typically cover medical expenses and lost wages, while individual health insurance plans may not.

Delaware

Any company with employees in Delaware must have workers’ compensation coverage in accordance with state law. Employees will be protected in the event of an accident or illness on the job, and your company will be protected from lawsuits as a result of this mandate.

Delaware law makes an exception for farms and ranches. But if they so choose, these businesses can still carry policies for their staff. If they don’t, they could be held responsible for any accidents that happen on the job. The Delaware Workers’ Compensation Fee Schedule is available for use as a resource for businesses and insurers in determining how much to pay for medical care for employees who have been injured on the job.

Florida

Workers’ compensation coverage is mandatory in Florida for businesses with four or more employees, per state law. However, the precise coverage you need will depend on factors such as the nature of your business, the size of your staff, and the types of employees you have.

In Florida, a workers’ compensation policy is mandatory for the following industries:

• Businesses that employ at least one person in the construction industry. Keep in mind that corporate officers and members of limited liability companies (LLCs) are also considered employees.
• Agricultural businesses employing at least six people. Coverage is also required if 12 temporary employees work more than 30 days in a season, but no more than 45 days in a calendar year.
• Out-of-state employers with employees in Florida must have a workers’ compensation policy with an approved insurance carrier.
• Contractors who use self-employed or independent contractors must ensure that they have workers’ compensation coverage for them before beginning a project in the state.

Georgia 

Any Georgia employer with three or more regular, temporary, or seasonal workers must carry workers’ comp insurance. Some workers, however, are exempt from this rule:

• Railroad employees
• Government employees in the United States
• Farm laborers
• Domestic employees

Workers’ compensation payments are based on the employee’s degree of injury or illness. Depending on the severity of the injury or illness, workers’ compensation benefits may be paid out for as long as 400 weeks.

Hawaii

In Hawaii, any company with employees must carry workers’ compensation insurance. This holds true for all workers, whether they are temp workers, seasonal workers, permanent workers, or full-time workers. Nonetheless, the laws requiring workers’ compensation in Hawaii are subject to a number of exemptions. The law does not require insurance for the following business owners and executives:

• Independent contractors and sole proprietors
• Business partners
• Any corporate executive who owns at least half of the company
• Members of limited liability companies (LLCs), if they are individuals (rather than business entities) and stand to receive at least 50% of the LLC’s value if the company is liquidated or sold.

You should seriously think about getting workers’ comp insurance even if it’s not mandated by law. It’s usually a good idea because individual health insurance policies rarely cover injuries sustained on the job, and those that do often don’t cover any lost wages.

Idaho 

Workers’ compensation insurance is mandatory in the state of Idaho for any business with one or more employees. Included are both regular and temporary workers, such as those employed during the summer and winter seasons. To comply with Idaho’s workers’ compensation laws, a policy must be in place before any employees can be hired. According to Idaho law, independent contractors fall under the category of employees, as well. To find out if your contract workers need insurance, talk to a representative from the Industrial Commission’s Employer Compliance division.

Workers’ compensation may not be mandatory in Idaho for some industries or classes of workers. Some examples are:

• Domestic workers
• Workers covered by the federal workers’ compensation law.
• Pilots for dusting or agricultural spraying (these are only exempt under certain conditions)
• Real estate brokers and salespeople who work on commission.
• Volunteer ski patrollers
• Secondary school athletic officials (grades 7-12)
• Casual employees who work irregular hours and are unrelated to your business.

You may also be exempt if you are the owner of your business and:

• You have no employees.
• Your employees are your family and live in your home.

Workers’ compensation insurance is recommended even if your company is exempt from having to carry it. If you don’t have it, employees who get hurt or sick on the job can file a lawsuit against you.

Illinois

Workers’ compensation insurance is mandatory in Illinois for most businesses. More than 91% of workers in Illinois are now covered by workers’ compensation insurance thanks to the state’s workers’ compensation law. Read up on the Illinois Workers’ Compensation Act to ensure you’re following the state’s legal requirements for workers’ compensation. Here are a few of the most crucial rules to remember:

• Even if your employees are members of your family, you generally need coverage.
• If you intentionally and deliberately fail to obtain coverage, you could be subject to a minimum $10,000 in penalties.
• Employees have 45 days to inform their employers of an illness or injury.
• Every six months, the Illinois Department of Employment Security updates its average weekly wage report.

Workers’ compensation benefits in the state of Illinois are subject to a three-business-day waiting period. This means that benefits will be paid out to an employee if they are still injured or ill on the fourth day following an accident or illness. If your worker misses work for more than two weeks in a row, they are eligible for compensation for those days. They will receive this benefit until they are healthy again.

Indiana

Most employers in Indiana must carry workers’ compensation coverage. Workers who meet the criteria for independent contractor status as established by the IRS are a notable exception to this rule. A Workers’ Compensation Clearance Certificate and a $20 filing fee must be submitted to the Indiana Workers’ Compensation Board if any of your employees fall into this category. Independent contractors operating as sole proprietors are also subject to these rules.

Iowa

There are some exceptions to the general rule that all Iowa employers must have workers’ compensation insurance. The following are examples of such exceptions:

• Sole proprietors
• Members of a limited liability company (LLC)
• Partners in a partnership
• Corporate executive officers owning at least 25% of common stock in the business.
• Workers related to you.
• Casual employees, whose work isn’t done for business purposes.
• Employees earning less than $1,500 annually.

Some businesses are exempt from the state’s regulations, including those in the agricultural sector. Even if you are not required to have it by law, workers’ comp insurance is probably a good idea. Without insurance, you might have to foot the bill for a worker’s medical care if they get sick or hurt on the job. Employees who become ill or injured can also sue your business.

Kansas

Workers’ compensation insurance is required by law in Kansas, with a few exceptions. Certain types of employers and employees are not included:

• Employers in specific agricultural occupations
• Firefighters who work for relief associations
• Independent contractors who work in real estate
• Employers paying no more than $20,000 in annual gross payroll.

Keep in mind that the $20,000 threshold applies to all payments, including wages earned outside of Kansas, for the purposes of a workers’ compensation exemption. Pay for partners and dependents of sole proprietors is not included.

Kentucky

Any company in Kentucky with even one worker must have workers’ comp coverage. You’ll also need proof of insurance, or a certificate of insurance, in the form of a letter from your insurer, outlining key provisions of your policy. Insurance certificates must be prominently displayed in the workplace in Kentucky. Kentucky’s workers’ compensation law provides an exemption for the following categories of workers:

• Agricultural workers
• Members of a religious group or sect that are morally opposed to insurance coverage
• Housekeepers in a private residence with fewer than two other regular employees
• Any person performing home improvement, maintenance, or repair work for a religious or philanthropic organization in exchange for food or other support for a period of fewer than 20 days.

Employees in Kentucky can actually opt out of workers’ compensation coverage by filing a Form 4 Waiver with the Department of Workers’ Claims. Once the waiver is issued, it will remain in effect until it is revoked. If a worker gets sick or hurt on the job but has declined insurance, they can still sue their employer in court. Here, the burden of proof shifts to the worker, who must show that the employer was negligent or malicious.

The state of Kentucky prohibits employers from requiring employees to sign a Form 4 Waiver as a condition of employment. Employees’ waivers are only valid if they are signed voluntarily. If businesses require employees to sign Form 4 Waivers, they risk legal repercussions.

If you have even one employee in Louisiana, state law mandates that you purchase workers’ compensation insurance. This includes all workers who are:

• Full-time
• Part-time
• Minors
• Seasonal workers

Keep in mind that you might not need workers’ compensation insurance if you don’t have any employees. If a corporate executive owns more than a predetermined percentage of the company, they can often get out of paying for this insurance. It’s also worth noting that the workers’ compensation regulations you must follow will change depending on the nature of your company. But, in general, if you have workers, you’ll need one of these policies in Louisiana.

Maine

Workers’ compensation insurance is mandatory in the state of Maine for most businesses. However, this law does not apply to the following employers and employees:

• Employers in agriculture or aquaculture with seasonal or casual workers, if they have at least $25,000 in employer liability insurance and $5,000 in medical payments coverage.
• Agricultural or aquacultural businesses with six or fewer employees that have at least $100,000 in liability insurance and at least $5,000 in medical payments coverage.
• Domestic workers in a private home.
• Sole proprietors who don’t have any employees.
• Independent contractors hired on a project basis who are not full-time employees.

You are required to carry workers’ compensation insurance unless you are exempt. Without it, employees who get hurt or sick on the job can sue you for damages. Fines and criminal charges could also be levied against you and your company.

Maryland

Both full-time and part-time workers in Maryland must be covered by workers’ compensation insurance. But the state of Maryland does not mandate workers’ compensation for agricultural employers with fewer than three employees, or an annual payroll of less than $15,000. Workers’ compensation insurance is optional in the state of Maryland for sole proprietors, partners in a business partnership, and independent contractors. But if you are in this category, you may want to consider buying this insurance to safeguard yourself against the high cost of medical care.

Massachusetts

No matter how many employees you have or how many hours they work per week, you are required to carry workers’ compensation insurance in the state of Massachusetts. The only exception to this rule is domestic service workers, who must work a minimum of 16 hours per week in order to be eligible for workers’ compensation coverage. Moreover, sole proprietors are exempt from needing workers’ compensation insurance.

The Department of Industrial Accidents (DIA) is responsible for enforcing the workers’ compensation law in Massachusetts. They do not, though, have authority over the rates or class codes used to calculate workers’ compensation premiums. Instead, the Workers’ Compensation Rating and Inspection Bureau of Massachusetts (WCRIBMA) establishes these rates and codes.

Michigan

Most businesses in Michigan are required to have workers’ compensation insurance by the Workers’ Disability Compensation Act. Workers’ compensation insurance is required if your business has three or more employees, or if any single employee works more than 35 hours per week for 13 weeks or longer.

In Michigan, workers’ compensation insurance is mandatory for both public and private sector employers.The state law, though, is not strictly applied in the following cases:

• Employers with agricultural workers, unless they have three or more employees working more than 35 hours per week for 13 weeks.
• Housekeepers and other domestic workers
• Sole proprietors who are classified as self-employed.
• Family members working as employees for a relative
• Independent contractors 

Workers’ compensation insurance laws and regulations in Michigan are very important to learn, since businesses risk financial penalties for noncompliance.

Minnesota

The Workers’ Compensation Act of Minnesota specifies the rules governing workers’ compensation in Minnesota. In the state of Minnesota, workers’ compensation insurance is mandatory for all businesses. However, there are a few cases where this law does not apply:

• Household employees in a private home earning less than $1,000 in a three-month period.
• Farm workers who do not earn more than a certain amount of money, as well as the farmer’s or employer’s immediate family members (spouse, parent, or child) who also work on the farm.
• Casual employees who work only once or infrequently and are not employed permanently or on a regular basis.

Mississippi

If you have five or more employees in Mississippi, you are required by law to carry workers’ compensation insurance. But there are a few exemptions to the workers’ compensation rules in Mississippi. Workers’ compensation insurance is optional in your state for the following categories of workers:

• Domestic workers
• Farm workers
• Employees of non-profit organizations
• Religious or cultural organization employees
• Independent contractors
• Employees of the federal government
• Certain maritime or transportation workers who are covered by federal workers’ compensation laws.

The state of Mississippi now has no-fault workers’ compensation insurance thanks to the Workers’ Compensation Act. That means that employees won’t have to worry about covering the costs of medical care or lost wages due to an injury on the job, regardless of who was at fault.

Missouri

Any company in the state of Missouri with five or more employees is required by law to carry workers’ compensation coverage. All LLC participants and company executives need to be covered. In addition, if a construction company employs even one person, it must have insurance. Workers’ compensation insurance is not mandatory in the state for the following categories of workers:

• Farm workers
• Domestic workers
• Some real estate agents
• Direct vendors
• Owner-operators of commercial motor vehicles (commercial truckers)

Consider purchasing a policy even if you don’t think you need it because your company has fewer than five workers. Without workers’ compensation, your company would be responsible for covering the cost of an injured worker’s medical treatment out of its own funds. In addition, if an employee is hurt or gets sick while on the job, they could sue your business.

Montana

Businesses operating in Montana are subject to stringent regulations regarding workers’ compensation. Unless exempt, every company that employs people must have workers’ compensation insurance. This rule applies to all companies, regardless of whether their workers are regulars or temp workers. With that being said, workers’ compensation insurance is not necessary for all types of employees, including:

• Domestic or household workers
• Commission-based salespeople in real estate, securities, or insurance
• Newspaper deliverers
• Freelance writers who are paid per article
• Licensed barbers or cosmetologists employed by a cosmetology firm on a contract basis
• Church ministers or members of religious orders

Nebraska

In accordance with Nebraska law, any company with at least one employee must maintain workers’ compensation coverage. The following, though, are not covered by Nebraska’s workers’ compensation laws:

• Railroad companies
• Domestic workers who are employed in private residences.
• Businesses employing agricultural workers.

Employees of sole proprietorships, partnerships, and LLCs are exempt from the requirement to carry workers’ compensation insurance as well. In addition, the state does not require workers’ compensation for corporate executives who own more than 25% of their company’s common stock. Executive officers of nonprofits in the state who earn less than $1,000 per year are also exempt.

Any of the above can buy this type of insurance if they choose to, though. This is a smart move because medical insurance typically does not pay for lost wages and only partially covers injuries sustained at work. If a company’s top executive wants to purchase workers’ comp insurance, they must inform both the insurance provider and the company secretary.

Nevada

Workers’ compensation insurance is mandatory in the state of Nevada for any employer, be they an individual, a business, a nonprofit, or a publicly traded company with employees. The term “employee” refers to anyone who works for a company either directly or through a contract of hire or an apprenticeship. There is an exemption, though, for casual workers not related to your business who worked for less than 20 days and were paid less than $500.

Nevada is one of only a handful of states that requires workers’ compensation insurance to be carried by sole proprietors, independent contractors, subcontractors, and their employees. Unless they qualify as an “independent enterprise,” they are employees.

New Hampshire

The state of New Hampshire mandates that all businesses carry workers’ compensation insurance. Employees who become ill or injured on the job are eligible to receive workers’ compensation benefits after four days of disability. But there is no need to wait the standard three days if:

• The disability lasts for at least 14 days.
• They return to a temporary, alternative job within five days.

The typical compensation for an injured worker is 60% of their regular weekly wage. Gross earnings in the 26-52 weeks prior to the injury will be added up and then divided by the number of weeks to get an estimate of their average weekly salary. Their weekly allotment will be based on their starting salary if they haven’t been with the company for 26 weeks.

Workers’ compensation does not apply to people who are sole proprietors, partners, or independent contractors. However, you have the option to purchase workers’ compensation if you fall into this category. Considering the high cost of healthcare, this is a prudent move, especially for those in dangerous professions.

Officers of corporations and members of LLCs are exempt from workers’ comp as long as their company has no more than three executives. But once a fourth executive or LLC member is brought on board, workers’ compensation insurance must be purchased. Subcontractors with no employees may also be required to obtain insurance by the project’s general contractor.

New Jersey

The state of New Jersey mandates that all businesses have workers’ compensation coverage. Even if your New Jersey business is an LLC or only hires seasonal or part-time employees, you are still required by law to carry workers’ compensation insurance. If you are unable to provide proof of insurance, you may be subject to a fine or criminal charges. There are some types of employees/business owners for whom workers’ compensation is not mandatory in New Jersey:

• Unpaid interns
• Unpaid volunteers
• Independent contractors
• Sole proprietors with no employees

New Mexico

The state of New Mexico has strict requirements for employers to carry workers’ compensation insurance. Businesses with three or more employees are required to carry workers’ compensation insurance, and all construction companies, regardless of size, must do the same.

The state considers anyone who works for a company to be an employee of that company. The “three or more” rule applies to business owners who also perform work within the company. The mandated coverage extends to both full-time and part-time employees, as well as seasonal and remote workers. But there are a few exemptions to these rules:

• Household employees
• Real estate brokers
• Employees of the federal government who are covered by the Federal Employees Compensation Act or other federal programs.
• Contractors who work on their own

Even if insurance isn’t mandated in New Mexico, residents are urged to protect themselves by purchasing this type of coverage voluntarily. This will safeguard your company from legal action and provide financial security if they incur medical expenses. An Election to be Subject form must be filed with the Workers’ Compensation Association (WCA) before an exempt employer can voluntarily purchase coverage.

New York

Workers’ compensation insurance is mandatory in the state of New York for any business with employees. There are narrow exceptions to this rule that an employer can take advantage of under state law. Having worker’s compensation insurance is recommended even if you are exempt. Without workers’ compensation, an employee who sustains an injury while on the job may be responsible for covering the full cost of their treatment out-of-pocket because their regular health insurance policy may not cover occupational injuries, and they may sue you for damages. 

North Carolina

Businesses with three or more employees in North Carolina must comply with the NC Workers’ Compensation Act (NCWCA) and obtain workers’ compensation insurance. There are some exemptions to this rule in North Carolina due to the broad definition of “employee.” For example, workers’ compensation is not required for people who are self-employed or who are members or partners in a limited liability company. 

North Dakota

Before hiring any staff in North Dakota, most companies are required by law to obtain workers’ compensation insurance, but some workers in North Dakota do not have to be insured. If they can prove their independence, independent contractors are exempt from having to purchase workers’ compensation. The individual asserting independent contractor status must provide evidence to support their position.

A determination by North Dakota Workforce Safety & Insurance (WSI) that an individual is exempt from workers’ compensation because they are an independent contractor will remain in effect for the duration of that calendar year. In order to receive an exemption, businesses or contractors should get in touch with WSI and ask for a “Independent Contractor Verification Application.”

Ohio

The state of Ohio requires all businesses with employees to have workers’ compensation coverage. Officers of a corporation are employees unless they are serving pro bono. The following, though, do not fit Ohio’s definition of an employee:

• Domestic workers earning less than $160 per quarter, such as cooks or gardeners.
• Most volunteers 

Workers’ compensation insurance is mandatory for those working part-time, but in the event of an injury, the part-time worker’s benefits would be determined by a formula that factors in the person’s typical working hours.

Oklahoma

In Oklahoma, almost all businesses are mandated to carry workers’ comp coverage. Your state’s laws regarding workers’ compensation may provide exemptions for certain categories of workers, employers, and business owners:

• People who are self-employed (sole proprietors)
• Members of a limited liability company (LLC) who own at least 10% of the capital.
• Members of a partnership
• Stockholders in a business who own at least 10% of capital.
• Family businesses with five or fewer family-related employees

In addition, independent contractors are not eligible for workers’ compensation coverage because they are not considered employees. To determine whether an individual is an independent contractor or an employee, the state of Oklahoma employs a rigorous, multi-factor test. The government takes into account the following:

• The contract’s nature
• The degree to which the principal employer has control over the work.
• Whether the individual works in a specific occupation or runs a business for others
• Whether the individual works under supervision or on their own

If your worker is considered an independent contractor, you are not required by Oklahoma law to provide them with workers’ compensation coverage. But you should still look into workers’ compensation even if your employees are exempt, because gaps in coverage can leave your company vulnerable to lawsuits.

Oregon

Having workers’ comp insurance is a legal requirement for most businesses in Oregon. With that being said, workers’ comp is optional for the following types of workers:

• People who work in a private home providing a domestic service, such as home health aides
• Gardening, maintenance, repair, or remodeling workers hired by a homeowner.
• Casual workers 
• Employees with annual earnings of less than $500

The state of Oregon does not mandate that you purchase workers’ compensation insurance for these workers, but you are free to do so if you choose. Lack of workers’ compensation coverage can leave you and/or your business vulnerable to lawsuits, so it’s a good idea to look into it even if your employees are exempt.

Pennsylvania

Employers in the state of Pennsylvania must cover their employees with workers’ compensation insurance. Workers’ compensation benefits in Pennsylvania include payment of a portion of lost wages and medical costs for any employee who sustains an on-the-job injury, regardless of whether they work full-time, part-time, or seasonal hours. If all of a Pennsylvania business’s employees fall into an exempt category, like railroad workers, longshoremen, federal employees, and domestic workers, the business is exempt from carrying workers’ compensation insurance.

If you’re a sole proprietor or self-employed, you don’t have to worry about getting workers’ comp. But self-employed workers in Pennsylvania are still eligible for lost wage and other benefits under a workers’ compensation policy, so it is a good idea to purchase coverage even though it is not mandated by law. It’s also possible that a business that wants to hire you as an independent contractor will be hesitant to do so if you don’t have your own insurance.

If you or your employee are exempt from workers’ compensation coverage, you must file an exemption application and supporting documentation with the Bureau of Workers’ Compensation of the Pennsylvania Department of Labor and Industry.

Rhode Island

If you have employees in Rhode Island, the law requires you to carry workers’ compensation insurance. Posters showing proof of workers’ comp insurance, including the name of your insurance provider, must be displayed in the workplace. There is a potential $250 fine for not doing so.

You can include an employee in your workers’ comp policy even if they are exempt from required coverage. In the event of an accident on the job, this can help safeguard both them and your company.

South Carolina

Businesses with four or more employees in South Carolina are required to carry workers’ compensation insurance. All employees, whether full- or part-time, as well as unpaid or compensated family members, are counted here. This is also true for nonprofit organizations.

Subcontractors must be included in the general contractor’s insurance policy unless they have their own policy. If an employee of a subcontractor is injured on the job, the general contractor can avoid legal trouble by relying on the subcontractor’s workers’ compensation coverage. There is no legal requirement for sole proprietors, partners, independent contractors, or members of an LLC to purchase workers’ compensation insurance for themselves.

Even if it’s not mandated in your state, you should get workers’ comp insurance. Injuries sustained at work may not be fully covered by your health insurance, leaving you with costly out-of-pocket expenses. In addition, unlike workers’ comp, health insurance does not compensate for income loss.

South Dakota

Unlike in many other states, businesses in South Dakota are not mandated to have workers’ comp insurance. But in order to protect themselves from potential lawsuits, businesses are strongly encouraged to purchase workers’ compensation insurance. Purchasing workers’ compensation insurance will shield you from liability should an employee sustain an injury on the job and sue you for negligence. 

If you’re self-employed or working on a contract basis, getting this insurance may be required or simply make good financial sense. Work-related injuries may not be fully covered by health insurance, even if you have it. Furthermore, unlike workers’ compensation, health insurance will never pay for lost wages in the event of an illness or injury.

Tennessee

In Tennessee, having workers’ compensation insurance is not only recommended, but mandated by law. Businesses with five or more employees in Tennessee, including family members, part-time workers, and corporate officers, are required to carry workers’ compensation insurance.

Furthermore, construction businesses and trades with one or more employees are required to carry workers’ compensation. If you are a sole proprietor, partner, officer, or LLC member of a construction company, though, you may qualify for an exemption. Employers in the coal mining industry must cover their workers with workers’ comp insurance.

Even if your business’s size makes it exempt from being required to carry workers’ compensation insurance, you can still purchase a policy. An “Exempt Employers Notice of Acceptance of the Tennessee Workers’ Compensation Act” must be filed with the Tennessee Bureau of Workers’ Compensation prior to the purchase of any such policy. You will have to submit Form I-8 to the state to opt into carrying workers’ compensation insurance, and you must also use that same form to notify the state when you no longer wish to carry workers’ compensation insurance.

Texas

Unlike the majority of other states, Texas does not mandate that businesses have workers’ compensation insurance, though businesses that opt out still need to inform both the state and their employees that they do not provide workers’ comp. Having said that, there are specific categories of businesses and employees who must be covered by workers’ compensation. If you are a sole proprietor, independent contractor, or otherwise self-employed, you may wish to protect yourself financially by purchasing workers’ compensation insurance even though it is not mandated by law. Potential customers may insist that you carry this coverage.

And, if you work in a hazardous field or perform physically demanding tasks, investing in workers’ compensation insurance is a prudent financial move. If you sustain an injury at work, your health insurance provider may not pay for all of your necessary medical care. In addition, unlike workers’ compensation, health insurance never pays for lost wages.

Utah

Most employers in the state of Utah need to have workers’ compensation coverage. Workers’ compensation insurance must be purchased to cover any and all employees beginning with the first hired. Employees of sole proprietorships, LLCs, partnerships, and independent contractors are not required to carry this coverage, though.

The corporate officers and directors of your company may or may not be required to carry workers’ compensation insurance. But you will be required to apply for an exemption from the Utah Labor Commission and notify your workers’ compensation insurer if you choose not to purchase workers’ comp. Even if it is not mandated by law, investing in workers’ comp is a sensible financial move. If you get hurt on the job, your health insurance may not pay for all of your medical expenses. In addition, unlike workers’ compensation, health insurance never pays for lost wages.

Vermont

The state of Vermont requires all businesses with employees to carry workers’ compensation insurance, with the following exceptions:

• Sole proprietors or partners in unincorporated businesses 
• Members of limited liability companies (LLCs) and corporate officers
• Casual workers, or those who are not employed in the core functions of the business.
• Someone who participates in amateur sports.
• A person employed in agriculture or other farm jobs whose employer has an annual payroll of less than $10,000.
• Certain elected officials and volunteers

Vermont law mandates that you have workers’ compensation insurance if an independent contractor provides labor for your project. You are not responsible for providing insurance if the contractor is working alone.

Virginia

Businesses with three or more regular or temporary employees in Virginia must have workers’ comp coverage. In addition, businesses that contract out work to outside parties must count those contractors as employees for the purposes of workers’ compensation.

In Virginia, sole proprietors who employ neither regular employees nor independent contractors are exempt from the requirement to carry workers’ compensation coverage. Virginia’s Workers’ Compensation Commission (VWC) does not require sole proprietors to file an exemption or waiver form. With that being said, the state treats you as an employee for workers’ comp purposes if you are an executive or corporate officer at your company. But it does allow you to opt out of insurance coverage if you so choose. To opt out, you will have to:

• Have valid workers’ compensation coverage for your company’s other employees.
• Fill out a Rejection of Coverage form and submit it to the Virginia Workers’ Compensation Commission.
• File a copy of the form with your insurance company.

Washington

In the state of Washington, workers’ compensation insurance is mandatory for any company with employees. Coverage is typically obligatory if you have any employees, including independent contractors and part-timers. However, the following employees are not subject to the state’s workers’ compensation laws:

• Domestic workers, when there is only one employed, and they do not work more than 40 hours per week.
• Gardening, maintenance, and repair workers in private homes
• Musicians and entertainers at specific events
• Children under the age of 18 who are employed by a parent for farm work.
• Cosmetologists and barbers who rent or lease their space.

West Virginia

In the state of West Virginia, workers’ compensation insurance is mandatory for any company with employees. There are a few loopholes in West Virginia’s workers’ compensation laws, though. You won’t need workers’ comp insurance for:

• Fewer than three employees who work temporary jobs lasting no more than ten days per quarter.
• Five or fewer agricultural workers
• Domestic workers
• Church employees
• Athletes in professional sports
• Temporary state employees 
• Emergency service volunteers
• Longshore and harbor workers

Workers’ compensation insurance is optional for sole proprietors and independent contractors in West Virginia. If you fall into this category, though, it is highly recommended that you purchase insurance to cover the costs associated with a work-related injury. Injuries sustained on the job are not always fully covered by health insurance, and lost wages are never covered, unlike with workers’ comp.

Wisconsin

Almost all employers in Wisconsin are required to carry workers’ compensation insurance. All employees, whether full- or part-time, as well as their dependents of any age, must be insured. The Wisconsin Workers’ Compensation Act mandates insurance for almost all workers, but there are some exceptions depending on the nature of the job. Exceptions to the need for workers’ compensation include:

• Domestic workers
• Volunteers, including those in nonprofit organizations, who are paid in cash or other items worth $10 or less per week.
• Members of a religious sect
• Employees of Native American tribal enterprises (including casinos), unless the tribe chooses to waive sovereign immunity and voluntarily participate in state workers’ compensation.
• The majority of real estate brokers, agents, and salespeople
• Certain federal employees who are covered by federal workers’ compensation programs.

Wyoming

Most employers in Wyoming are required by law to purchase workers’ compensation insurance to cover their employees. Those who are exempt from mandatory insurance coverage include:

• Casual workers
• The majority of professional athletes
• Domestic workers in private households
• Private duty nurses who work for an individual
• Employees of the federal government
• Volunteers for some organizations

Although some Wyoming businesses may be exempt from carrying workers’ compensation insurance, it is important to note that all businesses in the state are required to register with the Division of Workers’ Compensation and Unemployment Insurance. Furthermore, the following business owners are exempt from the provisions of the Wyoming Workers’ Compensation Act regarding workers’ compensation insurance:

• Independent contractors and sole proprietors
• Partners
• Limited liability company (LLC) members 
• Corporate executives

The aforementioned proprietors are free to invest in a workers’ comp policy if they so desire. Getting workers’ comp is a smart financial move, because medical insurance won’t compensate you for lost wages and may not fully cover injuries sustained on the job.

EZ Can Help

Even if you have only one non-family employee, it is likely that you will need to include the price of workers’ compensation insurance in your business budget. But don’t worry: an EZ agent can tell you exactly how much coverage you need, and find the right policy for you, at the right price. And if you’re also considering group health insurance, general liability insurance, commercial property insurance, or any other policies for your small business, we can help you find the best policy – or the best bundle – around.

Please get in touch if you have any questions about our small group medical, general liability, and workers’ compensation insurance. Licensed EZ insurance agents can assist with determining which state regulations apply to your business and can explain your insurance options once you give us some information about your company, its needs, and your risks. After they get to know you and your business, your EZ agent will work with you to locate a policy that meets your requirements at a price you can afford. Call 877-670-3538 right now to get started.

Depending on your industry, clients may add it to their contract with you that you need to carry workers’ comp. For example general or subcontractors typically have to have workers’ compensation for someone to hire them to do work for them. This is because workers’ compensation policies typically don’t extend to any contractors you hire on temporarily. Most health insurance policies don’t cover accidents that happen at work. Let’s say you work for yourself and have health insurance. You hurt your back at work when you picked up a big box. If you got hurt at work, your health insurance might not pay for your hospital bills. This means that you have to pay for all the costs and fees connected to your injury.

If you work as a freelancer, the same thing will happen. Even if you have health insurance, you should still have workers’ comp coverage. It can help you avoid a situation that will ruin your finances. You may also need it if you hire freelancers or independent contractors for specific projects.

Self-Employed Workers’ Compensation

It might seem strange to buy workers’ compensation for yourself, but it happens all the time. Many companies won’t hire you as a self-employed worker unless you have workers’ compensation insurance. This is because, if you get hurt on the job, you might be able to sue the company to pay for your medical bills. Even though you’re an independent contractor, businesses know that the courts will probably order them to pay.  Unless they buy workers’ compensation for you or you have it for yourself. A company can legally refuse to hire a self-employed worker who doesn’t have sufficient workers’ compensation insurance.

If you are self-employed as a sole owner and get paid through a 1099 instead of a W-2, you might not have to get workers’ compensation insurance. People often think that you only need workers’ compensation if you have people working for you. But that’s just not true for some kinds of businesses. 

Why Independent Contractors Need Workers’ Compensation

Most state rules don’t require independent contractors to have workers’ compensation insurance. But you may still need to buy this policy for a few reasons.

1. Clients Require It

Your clients may want you to have workers’ compensation and other types of small business insurance to protect them from danger. If you get hurt at work, they could be held accountable and have to pay for your medical bills. By asking you to have workers’ comp insurance, they know that if you get hurt on the job, they will be financially protected. When you buy a workers’ compensation package, your clients save money because they don’t have to pay for your protection. But make sure you’ve taken that cost into account when you set your fees.

2. Unexpected Injuries

You could get hurt at work even if you don’t do any hard work. A software worker could get carpal tunnel syndrome from years of typing on a keyboard. Working inside a computer, a person who fixes computers could cut their hand and be out of work until it heals. Workers’ compensation pays for medical care when you get hurt on the job, even if it’s because you tripped in your office. This includes going to the doctor, getting medicine, and going to physical therapy. If you get hurt at work and have to take time off, workers’ comp will pay you some of the money you would have made.

This may seem like something that would be covered by health insurance. But insurers can turn down claims for accidents that happen at work. Medical bills can also add up quickly. And if your employee takes a long time to get better, workers’ compensation payments can save your business. So, even when it’s not required, independent contractors and single proprietors may choose to buy this coverage for themselves.

3. The Law

Outside of the construction business, most state laws do not require independent contractors or self-employed owners to have workers’ compensation. States have strict rules about who can be an independent contractor, and companies who misclassify their workers could get in trouble. Even if you call yourself a “freelancer,” you might still have to carry workers’ compensation if you’re really an employee. This is the responsibility of the employer, and most states let one-person businesses choose not to have workers’ compensation benefits.

However, if you are required to have insurance for yourself or your employees and you don’t buy a policy, you could be fined significantly or be held responsible for their medical bills if they get hurt on the job. It’s important to learn about the rules in your state about workers’ compensation. Some states require protection for every kind of employee connection. Including 1099 employees, independent contractors, full-time and part-time employees, and freelancers.

Self-Employed Workers’ Compensation Exemption

In some states, you can get out of having to get workers’ compensation if you are a sole proprietor. A workers’ compensation exemption is a statement that you don’t need insurance because you don’t have any employees. For example, you can’t renew your general contractor license in California unless you have proof of coverage or a valid waiver for sole proprietors. To get a workers’ comp exemption for a sole proprietorship, you’ll need to fill out the right form for your state, take it to be notarized, and generally pay a small fee. You won’t have to pay for workers’ comp, but if you get hurt at work, you might have to pay out of pocket to cover your bills.

What If I Hire An Independent Contractor

When you hire your own contractors or subcontractors, you take on the responsibilities of a big employer. In some situations, like when an employer’s business has a lot of natural risks, it may make sense to require contractors and subcontractors to carry their own insurance so you don’t have to.

Your lawyer can help you decide if it’s a good idea to ask the people you’re doing business with for workers’ comp. They can tell you not only about the rules and laws where you live. But also how to change your job contract to include language that says coverage is required. Even if a worker has a 1099 status, like a 1099 contractor, the company is still responsible for paying any workers’ compensation claims. Legally, 1099 contractors only need workers’ compensation coverage if their boss requires them to have it. However, it may be in their best interest to carry a certificate of insurance to protect themselves and get contracts with future clients.

Other Self-Employed Insurance Options

While we’re talking about workers’ comp, it’s important to note that sole owners often need to buy other types of business insurance.

General Liability

Liability insurance will protect you financially if someone sues you for damages after slipping and falling in your coffee shop or breaking an expensive vase while you’re cleaning a client’s home. General liability insurance also pays for slander claims. This kind of safety can be bought as a separate policy or as a part of a policy for a business owner.

Professional Liability

Listen, everyone has flaws and makes mistakes. In this case, professional responsibility is helpful. It’s insurance that protects you if a client gets hurt because of a job you did for them or advice you gave them. It is also called errors and omissions insurance, which is a more popular name. Professional liability insurance covers cash losses in case of injury or damage. While general liability insurance covers injuries and damage to property.

Cyber Liability

In the business world, there are always physical risks like getting hurt or losing something. There are, however, risks that come with using technology that could hurt your business. Hacking and data leaks are just two examples. Hackers are very interested in the names and medical records of your customers that you store on company computers. In order for your business to quickly get back on its feet after a data breach or cyberattack, it is important that it has data breach or cyber liability insurance.

Business Owner’s Policy

By mixing two types of coverage, a business owner’s policy (BOP) protects your small business from a wide range of claims. Its coverage includes both commercial general liability insurance and commercial property insurance. The “general liability” part of a BOP protects your business in case someone sues you or your company. General liability insurance protects you from lawsuits if something like a customer slipping on a wet floor, a faulty product damaging a client’s property. Or a claim that your goods or services hurt someone. It can also protect you from claims related to libel, slander, and some types of advertising.

The property part of a BOP helps protect your business’s buildings, tools, furniture, and stock. Whether you own them, rent them, or lease them. It helps pay to fix or replace things that were stolen, damaged, or destroyed while they were in your care. Even if they didn’t belong to you. It can also pay for things like rent, salary, and other bills while your property is being fixed or replaced after a fire or another covered loss.

Working With EZ

Being self-employed or a a freelancer gives you more freedom and a better mix between work and life. One downside is that you’ll have to take care of your own insurance. This is something you must do. If you don’t have the right insurance, an accident or emergency could put you out of money. So, people who work for themselves and don’t have insurance are taking a chance by not getting it. EZ can help, though! We can give you free, quick quotes on business insurance, and we can also help you find the best plans for you. Enter your zip code in the box below or call 877-670-3557 to talk to a qualified agent.