You gave a great pitch and offered a competitive bid on a sweet job a client agreed to. The project is practically yours.
So you lay out plans to get started. But then an email arrives from one of your client’s employees saying, “Hey, good morning. We also need proof of your insurance coverage.”
You think to yourself, No big deal. You have your general liability and commercial auto insurance, so you figure you’re in good shape.
But when you reread the email, you see they also need your workers compensation insurance info.
Workers Comp? But you’re a one-person operation. You’re almost convinced you don’t need workers comp! Though it appears that to get this job, you do. So now what?
Don’t worry, you’re not alone. Many contractors have faced the same requirement. It’s one you weren’t expecting, but that does not mean all is lost.
Our agency has been efficient in putting policies together for hardworking folks like you who were caught in the same bind. But it’s essential to make sure you should pursue this policy in the first place.
Through this article, we’ll arm you with critical info that will help you confidently make that decision.
Keep reading to learn both why your client is requiring you to have workers compensation and what’s involved in obtaining this policy should you decide to purchase one.
What is the Purpose of Workers Compensation?
Before we dive in, let’s acknowledge what workers comp insurance is used for.
Remember that, if you don’t have your own policy, the following list are things your client would be responsible to cover if you were to be injured while doing work for them.
Your client won’t want to bear that responsibility or burden.
Why Do I Need to Have Workers Comp Insurance?
You can thank New York State for this one. Part of New York’s Labor rules requires companies to purchase workers compensation insurance for their employees.
It’s straightforward concerning a business with actual employees, but it becomes murky for those who are self-employed.
At the end of the year, your client’s insurance company will perform an audit of their W-2, 1099, and cash payments to individuals and companies.
For those who were issued a 1099 or who received cash payments, the auditor will want to see proof of workers comp insurance held by those vendors.
For all vendors who fail to show proof of workers comp, the monies paid to them will be added to your client’s workers comp audit.
This is a major headache for your client because it can get expensive.
When your client can show proof that you had your own workers comp policy—even though you’re a one-person operation—they are exempt from having to include you in theirs.
Things to Consider Before Obtaining Workers Comp Insurance
To know for certain if a workers comp policy will be worthwhile for you and your situation, there are a few things you’ll want to consider, starting with the big two:
- How much profit do you expect from this job? Worker’s comp policies for contractors can be expensive.
- If you’re the type of contractor who leaves the ground via ladder or scaffolding (think painters, roofers, carpenters), it can be hard to secure a policy due to the associated height risks.
Landscapers, flooring installers, or janitorial contractors can have an easier time, but the cost cannot be overlooked. In fact, historically, a workers comp policy is the most costly policy business owners have.
The only way to be certain about what you’re in for will be to obtain a quote for workers comp coverage. You’ll also want to consider how many other clients will have this requirement.
Workers comp is not a per-job policy but rather an annual one. So, if you’re going long term it could be advantageous from a profitability standpoint since you’ll have the essential insurance coverage to win more bids.
Should I Purchase a Workers Comp Insurance Policy for My Business?
Most small contractors like you do not carry workers comp insurance. With a policy in place, you’ll instantly jump ahead of the competition, thus filling your calendar with more preferred clients.
But if you forgo the policy you’ll have fewer opportunities to secure commercial jobs and will likely need to stay with more residential ones until you decide to purchase workers comp coverage.
As an agency that has worked with many small contractors throughout the greater Syracuse area, we know this can be a tough decision to make.
You don’t want to waste money on insurance, but you don’t want to leave money on the table either.
The good news is, we know when the time is and isn’t right for a small contractor to purchase workers comp insurance.
You’re now armed with information and are more insurance savvy than many others in your industry.
If you’re ready to secure the workers comp coverage you need to take your business to the next level, click Get a Quote below to get things started.
But if you have more questions and would rather speak to a Horan insurance specialist, call 315-635-2095. We’ll get to know more about your business and help you determine if purchasing a workers comp policy makes sense.
Either way, we’re looking forward to hearing from you.
Take an even deeper dive into New York Workers Comp.
