Who Really Needs Workers’ Compensation Insurance? You Might Be Surprised

Many business owners assume that workers' compensation insurance is only for large companies or high-risk industries. But in reality, many small businesses—and even self-employed individuals—may be legally required or strongly advised to carry it.
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Whether you’re a startup, a family-run operation, or a solo contractor, this article will explain who needs workers’ comp, why it matters, and the surprising groups who may be missing coverage they actually need.

What Is Workers’ Compensation Insurance?
Workers' compensation insurance provides wage replacement and medical benefits to employees who suffer work-related injuries or illnesses. In return, employees typically waive the right to sue their employer for negligence.

It typically covers:

• Medical treatment and rehabilitation
• Lost wages during recovery
• Permanent disability benefits
• Death benefits for surviving dependents

In most U.S. states, workers’ comp is required by law once a business hires even one employee—part-time or full-time.


Who Needs Workers’ Comp Insurance?
Here’s a breakdown of who needs coverage—and who might be surprised to find out they do:

1. Employers with One or More Employees
In most states, you must carry workers’ comp as soon as you hire your first employee—even part-time.

• Example: A bakery with one weekend helper must typically carry coverage.
• Exceptions: Texas and South Dakota don’t mandate it for private employers (but it’s still highly recommended).

2. Contractors, Subcontractors, and Freelancers
Some business owners wrongly believe that if they hire independent contractors, they’re not responsible. However:

• If the contractor doesn’t carry their own coverage, you could be held liable for their injury.
• Many companies require proof of workers' comp before hiring subcontractors.

Tip: Always request a Certificate of Insurance from contractors you work with.

3. Family-Owned Businesses
Hiring family members doesn’t exempt you. Most states require coverage even for relatives on payroll.

• Example: A landscaping company that employs the owner's son still needs workers’ comp.

4. Self-Employed and Sole Proprietors
While not legally required in many cases, it’s smart protection for sole proprietors in hazardous professions.

• Example: A self-employed roofer can get hurt on the job and have no coverage for lost income without workers’ comp.

5. Gig Workers and Remote Workers
Even if your employees work from home, injuries sustained during the course of work may still be covered.

• Example: A remote customer service rep slips and falls while heading to their home office.

6. Volunteers or Interns (in Some States)
Some states include coverage for unpaid workers, interns, or volunteers—especially in nonprofits or government-funded programs.


Why Workers’ Comp Is Essential
Even if not legally required, workers’ comp offers major benefits:

• Protects employees – Ensures injured workers get the care they need
• Protects employers – Reduces lawsuits and costly legal fees
• Boosts credibility – Many clients and contractors won’t work with uninsured businesses
• Complies with contracts – Many contracts require proof of coverage
• Keeps operations running – Supports a smooth return-to-work process

Penalties for Not Having Workers’ Comp
Failing to carry required coverage can result in:

• Heavy fines and penalties
• Legal liability for medical expenses and lost wages
• Criminal charges in severe cases
• Stop-work orders
• Ineligibility for future business licenses or contracts

How to Get the Right Coverage

• Check your state’s requirements – Laws vary by state and industry
• Work with a licensed insurance agent – They can tailor a policy to your business type and size
• Educate your employees – Make sure they know how to report injuries and file claims

Final Thoughts
Workers’ compensation insurance isn’t just for factories and big corporations—it’s a vital safety net for small businesses, freelancers, and family-run companies, too. If you think you’re exempt, double-check. You might be surprised to find out the law—and good business sense—say otherwise.

At Applegate Insurance, we strive to provide our clients with affordable and comprehensive policies. We will always go all out to satisfy your demands. To learn more about how we can assist you, don't hesitate to contact us at (540) 547-3733 or CLICK HERE ​to request a free quote.

Disclaimer: The information presented in this blog is intended for informational purposes only and should not be considered as professional advice. It is crucial to consult with a qualified insurance agent or professional for personalized advice tailored to your specific circumstances. They can provide expert guidance and help you make informed decisions regarding your insurance needs.​