Compensation insurance is not required but a very good idea for a self-employed worker. Any worker who runs his own business can face injuries that might result to medical expenses and income loss. The worker’s compensation act can cover these expenses and save you a lot of hazards and time. Self-employed workers can expect to pay anywhere form $200-$400 yearly. This is a small price to pay for the benefit it presents.
There are two reasons why a self-employed worker is mandated to purchase a compensation policy:
1. The contract requires a worker’s compensation coverage
Some businesses require that an independent contractor has a worker’s compensation coverage before they can win contracts. It becomes mandatory to have a worker’s compensation coverage before you place bids on this type of contracts.
2. Income protection
Most health insurance policies in states exclude work-related injuries and illness. If you purchase a worker’s insurance compensation, it will ensure that your medical bills will be taken care of if you are injured while working. In some instances, it also covers lost wages while you are unable to work
How does worker’s compensation for self-employed individuals work?
This class of policy covers business owners, self-employed individuals, and independent contractors who get injured while on duty. The injured or sick individual or company gets compensation benefits in to make up for lost wages, medical bills and injury as long as the premiums are paid regularly.
To protect a sole proprietor’s financial interest the worker’s compensation program is highly recommended but it is an option if you don’t see the need for it
There is a lot of misconception about the traditional health insurance policy. Many think it’s enough insurance show they suffer serious injuries that keeps them away from work. Most times, the independently acquired health insurance policies can reach insurmountable fees of $12,000 which small business and many self-employed workers can’t afford. Add that to the fact that most of the health insurance policies have long waiting periods before the benefits kicks in and you will understand the value of the worker’s compensation insurance.
Establishing the worker’s compensation act
Each State has its own laws and compensation market so the way they carry out their compensation polices will defer. Some make use of a state fund while others employ the use of private carriers. Larger states might opt to use a combination of both to address the compensation needs of workers. Employ the services of a worker’s compensation insurance provider with the help of attorneys like those from New Jersey Attorney to help determine your options.
Who is this policy right for?
As a self-employed worker or sole proprietor, you might not be able to prevent hazards or illness on the job but you can protect yourself from going bankrupt. Financial disaster can result from lost wages, illness or the inability to find future work. This policy is idea if you:
- Concerned about losing wages because of illness
- In need of a worker’s compensation insurance to secure a contract
- May need to hire an employee in the future
As a sole proprietor you are at risk of losing a significant amount of your wages if you stay always from work for extended period of time. So don’t see it as an expensive luxury requirement.
7 Myths about worker’s compensation
- My business isn’t big enough: The fact that you can count the number of worker’s you employ doesn’t mean you don’t need a worker’s compensation. Most state laws make it mandatory for business with one or more employees to take advantage of the policy. Self-employed workers can benefit immensely too.
- I’m in a low risk business: This is another wrong notion that prevents you from taking advantage of the policy. No business is free from illness which has the potential of knocking you down for weeks. Fortunately, policy makers take into consideration the risk level of your business before grafting your premium. You are more likely going to pay low premium if you run your business in an office.
- My team of professionals doesn’t need it: No matter how prepared or professional you or your team members are, they can’t predict the future. Errors and accidents do occur and your business is liable for this.
- I will never get sued: This is another fallacy. If you think your team is like a family and you will never get sued. Think again! You can get slapped with a lawsuit if a team member gets a fatal injury on the job. If you are a one man company you can get away with this.
- My Tax takes care of my worker’s compensation: This notion in its entirety is wrong. States don’t automatically provide businesses with worker’s compensation insurance policies because they are seen as been separate from corporate taxes. You will do well to recognize the difference.
- The payroll service I employ takes care of workers compensation: This is not always the case unless you have a copy of the contact with your payroll service and seen the premiums included as a line item, it’s wrong to go with this assumption.
- My workers are independent contractors: Because you pay workers on a 1099 doesn’t make them independent contractors. There are multiple criteria that need to be fulfilled before one can be regarded as a true independent contractor. Paying workers on a 1099 doesn’t exempt you from the obligation to carry out worker’s compensation.