Workers’ Comp for Contractors

We don’t necessarily love talking about insurance, do we? But when it comes to workers’ comp, it is a necessary evil. In case you aren’t terribly familiar with workers’ comp, it’s like a contract between the state and the business. The business agrees to help pay, through the appropriate insurance policy, for their employee’s medical treatment, ongoing care, lost wages, funeral wages, and/or disability benefits in the event of an on-the-job injury. In turn, it dissolves the employee’s right to sue a company for damages. Let’s look at some starting points for talking about workers’ comp for contractors.

The Need for Workers Comp in Contracting

While workers’ comp isn’t often associated with jobs like cashiers, the contractor’s livelihood and workers’ comp insurance tend to go hand-in-hand. It’s a demanding and often dangerous job. What many people don’t realize is that health insurance policies almost never cover injuries acquired on the job. Let’s say a contractor is installing an in-ground pool and gets injured by a steel beam during the framing process. They go to the ER, incur medical bills, spend weeks in rehab, and are out of work. Their health insurance is not going to cover the bills or the missed pay they accumulate for that incident. If your company doesn’t carry workers’ comp insurance, with a liability policy, it’s possible that your employee could take you to court over the injury — looking to recoup their expenses and lost wages.

Although nearly every state requires businesses to carry workers’ comp for their waged employees, not every state requires businesses who employ independent contractors or 1099 employees to offer it. You can check your state’s requirements here. Even if your state doesn’t require it, in contracting, it’s a good idea to make sure you are covered.

Workers’ Comp Premiums

The calculation for workers’ comp insurance is based on several factors. First, it will take into account the business’s “class code”, or in lay man’s terms, how hazardous the job is. Also included the experience modification, which is based on your history of claims with the insurer versus the industry standards. This classification is a way for the insurers to assume how many claims you’ll have in the future. Payroll is the last factor in the equation. Here is a simple formula to use when figuring out worker’s comp for your business:

Premium = (Payroll/$100) x Class Code Rate x Experience Rate Modification

Risk Management Pays Off

Because contractors are often working demanding jobs with heavy equipment, it’s crucially important to set up good training. The best way to avoid expensive insurance premiums is to avoid injury in the first place. A good contracting business trains employees efficiently, provides all the necessary safety equipment, requires high standards for all of their contractors, and addresses any issues of safety and risk quickly and efficiently.

No matter what industry your contracting business is a part of, let HFS Financial help your clients. Think of all the injury-free projects your company could be a part of! It all starts with getting proper funds in the hands of your customer base. Call us today at 1-800-254-9560 or visit our website to learn more.

Workers’ Comp for Contractors

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