What is Workers’ Compensation Insurance?

This type of insurance provides benefits to employees who are injured, become ill or die at the workplace. This insurance is mandatory, by law, in almost every state in the U.S.

In California, every employer must provide insurance for his/her employees to cover the cost of medical bills and lost wages due to injury at work. Workers’ compensation insurance is viewed as a social type of insurance since it is a social contract between the employer and employee. In this way, business owners protect themselves from being sued by their workers in case of an accident.

How Does it Work?

The employee is obliged to meet the deadline in filing the report in case of an injury, otherwise they won’t receive the benefits they are entitled to by the insurance. Next step is gathering all necessary documents with information on incident. The following steps should follow:

  • Gather all medical records after visiting the doctor.
  • Gather information from the witnesses.
  • Complete the claim with information such as date, time, place and how the incident happened.
  • Receive the benefits.
  • Go back to work after recovery.

What Covers Workers’ Compensation Insurance:

  1. Medical care
  2. Temporary disability
  3. Permanent disability
  4. Death benefits i.e., if the worker dies at workplace, insurance will make payments to the spouse or children.

There Are Exceptions from Workers’ Compensation Insurance:

  • Independent Contractors
  • Sheriffs and clerks
  • Those who work for food and housing
  • Volunteers
  • Students
  • Sole proprietors (not roofers)

Worker’s Compensation for Self-employed and Independent Contractors in California

As mentioned above, California law states that all workers must carry workers’ compensation insurance, but there are some exceptions as self-employed workers, independent contractors, and sole proprietors.

On the other hand, it would be advisable for you to take insurance since you never know what type of job you will take, how many workplaces you will shift and what risks are there for you. Not being covered by the insurance can have great consequences for your future.

A great number of workers simply don’t have enough income to cover potential medical bills, legal expenses, and lost wages in case of disability to continue their work. Workers’ compensation for the self-employed will cover your medical expenses and lost wages in case of an accident. There are some cases where workers have been misclassified as independent contractors which would mean that they are entitled to insurance through workers’ compensation.

workers comp for sole proprietors

How Do Independent Contractors Get Misclassified in California?

Many business owners will design their businesses in a way to avoid paying insurance for their employees. They can hire an independent contractor instead of an employee. California law has recently established the rule called Assembly Bill 5 which states when a worker can be classified as an independent contractor and some of these criteria must be completed:

  • A person who hires another person doesn’t have control over his or her work.
  • The individual does the work far from his/her capacity.
  • The individual is commonly involved in some other work like the one done for the hiring person.

Bear in mind that even if you are an independent contractor, you have the right to sue the company that caused the accident even though you are not their employee. Also, sometimes it is not the fault of the company you worked for, but it may be that the property owner failed to secure the workplace.

Under California law, after filing the workers’ comp claim, the responsibility is entirely on the company you filed the claim against to prove that you are an independent contractor and not company’s employee. Remember that part-time jobs are also considered to be covered the same as full-time. California law will for sure be on your side if you manage to prove that you were an employee of the company at the time of the injury.

Workers Comp: Difference Between Employee and Independent Contractor

The question can be how an individual knows if he/she has been classified as employee or independent contractor? If at the end of the year you receive 1099 form instead of W-2 form for filling your taxes, you are for sure counted as independent. In case no taxes are deducted from your check by the people who hired you for the job, that is another proof you are counted as self-employed.


One Company, Multiple Options

When Should You Consider Buying Workers’ Compensation Insurance if You are Self-employed?

There are some situations when you, as self-employed individual should consider buying workers’ comp policy. For example, if you are a roofer, you are obliged by law to purchase workers’ compensation policy.

Another example is that many contractors who are self-employed are in fact covered by this policy by the person they do the job for. Construction sites can be considered very dangerous places of work where accidents may occur on daily bases, so the general contractors wish to be secured by this policy in case of injuries. This can be beneficial for both parties since the general contractor can avoid being sued and the self-employed individual will be compensated for his/her medical expenses and other expenses which follow the recovery of an injury.

There is a situation where the headquarters of the company is out of the state where you work. Nevertheless, they are obliged to provide the insurance according to the law in the state where you perform your job. So, if your job is in California, they must provide insurance for all California workers according to California law. Buying your own policy can be expensive for some independent contractors, so some of them must use their trust funds or search for the one that suits their financial situation.

Situations Where Getting the Policy Can Benefit You as a Self-employed Individual

  • If you work in a high-risk industry – We already mentioned construction sites as one of the most dangerous places of work. Other high-risk jobs can include exposing yourselves to chemicals, being a crane operator, construction helpers, maintenance workers, etc.
  • When you simply must follow the law – For some this is not optional. As we stated before, by California law roofers must have the policy even if the worker is self-employed.
  • Acknowledge contract obligations – It can happen that other businesses won’t work with you if you don’t own the policy because it can put them in financial danger in case of your injury.
  • Your business can shut down – If you run your own business and get injured at work place, you must shut down the whole business since you are self-employed with no other workers which will lead to financial crash. You won’t be entitled to compensation while on recovery since you don’t own the policy.

What Does the Workers’ Compensation Policy Cover and What Does not Cover if You are Self-employed


Workers’ compensation of course covers a great number of risks you can encounter at the workplace, but there are also some situations when you won’t be covered by the policy.

Self-Employed Workers’ Compensation Policy Covers:

  1. Medical expenses
  2. Diseases which occurred as a result of your work
  3. Violence at workplace
  4. Injuries that repeatedly happen
  5. Mental injury – stress at work
  6. Benefits for spouses and children in case of death
  7. Recovery expenses
  8. Permanent or temporary disability

Self-Employed Workers’ Compensation Does Not Include:

  1. If an injury happened outside workplace
  2. If an individual deliberately injured himself/herself
  3. Negligence
  4. If the injuries are the result of behavior that violated the policy
  5. If the injury is constant and permanent

How Much Does It Cost You to Buy Workers’ Compensation Insurance if You are Self-employed?

The cost of workers’ compensation insurance for self-employed workers depends merely on the industry they work in. Those industries that carry higher risk of injuries, as construction sites, roofing, welding, auto-mechanic work will naturally have a high-risk classification and would probably cost more.

There are two basic factors that classify the risk:

  1. How usual are the injuries in that industry in California
  2. How serious are the injuries in that industry

It also depends on how much the worker makes since his/her benefits will usually depend on medical bills following the loss of income. Insurance coverage cost will for sure be higher with high-risk jobs, but not owning one can have greater financial consequences.

Consider Some of These Tips Before Buying Workers’ Compensation Insurance for Self-employed

  1. An independent agency will help you get to providers who will guide you further and who have experience with insurances in your industry.
  2. You must make sure to follow the laws of the state you live and work in.
  3. Try to find one which suits your financial state since policy holders vary among insurance providers.

Other Types of Insurance for Self-employed

Many insurance companies offer other types of insurance for independent contractors and self-employed since there is the risk of other liabilities, not just work-related injuries.

These insurance coverages are:

  • General liability protects you both from bodily injuries and property damage as well as personal and advertising injuries. Learn detail about general liability insurance.
  • Commercial auto insurance may help you if you get involved in a car accident while using your vehicle for business purposes. Read more about commercial auto insurance.
  • Professional liability insurance protects your business in case a professional service makes a mistake with the customer or if your customers are not happy with you work or advice.

California Statute of Limitations and How It Can Affect Independent Contractor Workers Compensation

If you, however, decide to purchase Workers’ compensation insurance to protect yourself and your business as an independent contractor or self-employed individual, it is very important to be acquainted with the Statute of Limitation in the state of California (no follow).

You have twelve (12) months to file a workers’ compensation claim. After that time, you will lose your right to do it. This is how it works:

  • 12 months counts from the date when the injury occurred.
  • If you have a minor injury the statute will expand one year after the child’s 18th
  • Sometimes, your injury can be followed up by another injury. In that case, you have 5 years from your original injury to file a complaint.

When these types of injuries at work occur, it is best to act right away if you want to sue someone and ask for compensation. Later it can be very difficult to go back and gather all necessary evidence as well as interview the witnesses, thus failing to present the whole picture of an accident.

Workers Comp Insurance for Self-Employed in California

H&M agency is based in San Diego, CA, but operates throughout the state. It is a family-owned business, and it was founded fifty years ago. Since then, we covered many businesses with great insurance according to their needs and industry. We work with some of the biggest insurance providers in the U.S.: Nationwide, First Comp, Markel, Employers, CIG, Safeco, The Hartford and many more.

When it comes to workers comp insurance, we can save you from great financial loss whether you are an employer, employee or decide to purchase insurance as an independent contractor or self-employed individual. H&M insurance is one the leading companies that can provide you with financial security in case of an injury at the workplace. We are fast, thorough, affordable and we are committed to finding the best solution for your business. Call us for free quote and no-obligation consultation at (619)296-0005.