Workers Comp for Self-Insured
Do 1099 Contractors Need COIs?
Workers’ compensation insurance is essential. Anytime an employee gets hurt during a task or on your job site, workers’ compensation insurance comes into play. Today, employer and employee relationships are changing from the traditional 9 –to-5. Does this affect how we manage workers’ compensation with contractors or self-insured workers?
In this article, we cover 1099 types of contracts, how to manage their workers’ compensation insurance, and how to determine if a worker needs to provide a certificate of insurance.
What is a “1099” Worker?
First, it is incorrect to name a worker under a 1099 contract as an “employee.” They are independent contractors who are commonly known as freelancers. It is crucial to make this distinction because a wrongly categorized employee could lead to tax penalties for the employer. This is because a standard W-2 contract pays a lot more taxes than a 1099 contractor.
What defines an independent contractor?
An independent contractor:
- Follow their own schedule
- Gets paid on a per-job basis
- Provides their own equipment
- Is evaluated on the results of their work
- Is required to show proof of insurance
An independent contractor does not:
- Follow a schedule set by their employer
- Get a salary
- Get equipment from their employer
- Get evaluated regularly
- Get insurance from their employer
Do 1099 Contractors Need Workers’ Compensation Insurance?
Workers’ compensation is mandatory in almost every state no matter the type of contract the worker is under.
For example, even though subcontractors are not employees they will be asked to show a workers’ compensation certificate of insurance. In this case, employers are not obligated to provide insurance (because 1099 contractors are not employees) but 1099’s are still required to carry it.
Workers’ compensation insurance is very important, but it’s not the only insurance that 1099 contractors should have.
What Kind of Insurance coverage Does a 1099 Contractor Need?
It often depends on the type of work the contractor is doing and the requirements of that specific industry. As a rule of thumb, contractors need to have:
- Contractor Liability Insurance
This protects the contractor from damage or bodily injury on the job, reputational harm, and advertising injury. - Errors and Omissions Insurance
Protects the contractor from being accused of making a mistake in their services. Insurers also call this coverage “professional liability insurance.” - Disability Insurance
Contractors working in high-risk environments should have disability insurance. It covers the contractor if they become unable to work due to an injury or disability. - Commercial Auto Coverage
If the contractor gets in an accident while operating a motor vehicle on the job, commercial auto coverage will protect the 1099 contractor and the employer. - Commercial Property
Protects tools and equipment used for the job, whether owned or rented. - Umbrella Insurance
Protects from the costs of claims that exceed the limits of traditional policies. This is most useful when working with high-risk assets.
How Do 1099 Contractors Provide Proof of Insurance?
If an uninsured contractor gets injured on the job, the responsibility falls on the employer – which is why certificates of insurance are so important.
Certificates of insurance show:
- Proof that there is an active insurance policy
- The type of insurance policy
- The range of coverage
- The insurance expiration date
Workers can request certificates of insurance from their insurance carrier or provide one themselves if they are self-insured. Certificates of insurance are free and should be available upon request.
Correct certificate of insurance issuance and tracking are vital for the employer to identify potential liability risks. Tools for tracking certificates of insurance and managing renewals prevent expensive errors. Make sure your work is protected with an all-in-one tool like SmartCompliance. Get started today
