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Do 1099 Workers Need Workers' Compensation?

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Do 1099 Workers Need Workers' Compensation?

Getting injured or sick as a result of working at your job is without a doubt a worst-case scenario. But unfortunately, it happens. The fact that workers' compensation exists is proof of that. In fact, it's workers' compensation that can make a terrible situation easier to deal with for both employees and employers. It can provide employees essential financial and medical relief in the event of an injury that prevents them from working. It also saves employers from liability for employee injury or illness. Finding ways to save on costs is important for any business, especially small businesses where the difference between spending money and making money can be razor thin. Hiring independent contractors or freelancers can be more affordable for some businesses, but what happens when an independent contractor gets injured on the job? Workers' compensation is meant to protect employees, but since 1099 workers aren't technically employees, is there workers' comp insurance for self-employed individuals?

Key takeaways:

  • Workers' compensation provides benefits for employees injured on the job
  • There are certain eligibility requirements to qualify for a claim
  • Many companies require workers to have their own workers' comp for independent contractors coverage

Table of contents

What is workers' compensation?...Read more

Who is eligible for workers' comp?...Read more

Do 1099 employees need workers' comp?...Read more

Are contractors covered under 1099 workers' comp?...Read more

Occupational accident insurance for independent contractors...Read more

What is workers' compensation?

Workers' compensation, or workers' comp, is a government insurance program that provides wage and medical benefits for workers who get injured or become ill while on the job. Most employers are required by law to have this insurance. Typically, individual state laws ensure that companies have coverage, so the benefits for wage and medical benefits vary from state to state. Essentially a disability insurance program, workers' comp provides medical coverage or cash benefits to individuals who get injured while working or become sick because of their job and can no longer work. Let's say you are a teacher at a school. At the end of the school year, you're cleaning out your classroom closet, and you drop a heavy box that lands on your foot and fractures it. Since the injury happened at work while you were on the job, you could be eligible for the medical coverage needed to treat your foot, as well as paid time off while it heals. Or if you've been chronically sick, for example, and you come to find out you have mild poisoning because of a gas leak in your office ceiling, you've got a solid case for a workers' compensation claim.
Image showing examples of workers' compensation claims including slip & fall accidents, car accidents, illness due to employer's carelessness, heavy lifting injuries, burns or cuts from old equipment, and hearing loss. No relevance to self-employed, 1099, freelancer, or taxes.
If the injury happens outside of work, is a chronic illness or is something you had before you started your current job, you won't be eligible to receive disability benefits. But if an approved case requires long-term medical coverage, the workers' comp policy will cover those ongoing expenses. If a worker loses their life while on the job, the funeral costs will be covered, and compensation may be given to the worker's family. Workers' comp also offers employers peace of mind in case of an employee injury or illness at their business. They can be sure that their employees will receive the care they need to recover and return to work in tip-top shape. And, they'll know that the costs of the care won't drain the company's resources. Workers' comp also protects the employer from expensive lawsuits that might happen when a worker getting sick or injured, which have the potential to bankrupt an entire business.

Who is eligible for workers' comp?

There's basically one qualification to receive workers' compensation. Being an employee at a company with workers' compensation insurance is step one. You also have to have an injury or sickness you got from your job. By the way, you are still eligible even if you're a seasonal or part-time employee.
Image about Flyfin's workers' compensation insurance eligibility. Employers must have insurance for employees who get injured or sick at work and meet reporting deadlines. No mention of self-employed, 1099, freelancer, or taxes.
If you're an independent contractor, volunteer, freelancer, consultant or temporary worker, you won't be eligible for the coverage and will need your own freelance workers' comp insurance.

Do 1099 employees need workers' comp?

Many companies require independent contractors to have their own self-employed workers' comp insurance, regardless of state laws. There are a few reasons for this:
  • The business is typically required to pay for any claims, regardless if you're an employee or a 1099 worker. The business is typically required to pay for any claims, regardless if you're an employee or a 1099 tax payer. An uninsured independent contractor is a risk for an employer. But if an independent contractor has their own freelance workers' comp insurance, the employer is off the hook from any claims filed against them.
  • The business needs to pay for all uninsured 1099 independent contractors.
Annual business audits require that all individuals on the payroll, including employees and uninsured freelancers or independent contractors, have worker’s comp insurance. If the company fails to show proof of self-employed workers' comp insurance, the contractor is automatically added to the company's workers' comp policy, meaning more costs for the employer.

Are contractors covered under 1099 workers' comp?

Any company or business hiring full-time employees is required to have workers' comp coverage. With 1099 workers, things get a bit more complicated. Since 1099 workers are their own boss, they're responsible for handling everything tax-related, including self-employment taxes, income taxes, and also 1099 workers' comp insurance. Since employers aren't legally required to have coverage for independent contractors, they sometimes will misclassify workers to save on taxes. Naturally, it's crucial to distinguish between an independent contractor vs employee when it comes to tax purposes. An employee:
  • Is on the payroll
  • Receives a job offer with benefits
  • Earns an hourly rate or salary
  • Receives a W-2 that reports their income
  • Is covered by their employer's workers' compensation insurance
A 1099 worker:
  • Is paid hourly or on a project basis
  • Signs a contract for a set period of time
  • Pays self-employment taxes
  • Receives 1099 forms for work
  • Needs their own freelance workers' comp insurance

    Occupational accident insurance for independent contractors

    This type of insurance is an alternative to independent contractor workers' compensation insurance and is designed for employees and independent contractors who are not covered by an employer's workers' compensation insurance. In some states, employers can opt out of enrolling in workers' compensation insurance and choose occupational accident insurance for independent contractors instead. Unlike worker’s comp, you have the choice to choose certain aspects of your policy.
    Image shows Flyfin's Occupational Accident Insurance options including liability limit, disability coverage, deductible, and death benefit. Ideal for self-employed, 1099, and freelancers. Taxes not mentioned.
    If you're a 1099 freelancer or independent contractor, handling taxes can be a challenge. With FlyFin, you get access to tax assistance from experts in taxes for self-employed individuals. A.I. automatically tracks your expenses and finds every possible deduction, so you'll never have to worry about saving receipts or creating spreadsheets. FlyFin also has an estimated tax calculator to help you make quarterly payments. An expert CPA team reviews your taxes and answers any questions you have. Plus, you'll have access to full audit insurance. Filing taxes has never been easier for self-employed individuals.

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