When you operate your business solo in Central New York, unexpected workers comp requirements can delay payment for completed work and create costly surprises. Many contractors and service providers discover too late that lacking proper coverage can prevent them from collecting payment—even when they work alone.
At the Horan insurance agency, we work with multiple carriers and share information about workers comp requirements.
In this article, we'll explore why sole proprietors need workers comp coverage, how New York State requirements affect subcontractors, and what options exist for coverage that meets contractual obligations.
Understanding Basic Workers Comp Requirements for New York State Business Owners
While New York State requires employers to carry workers comp insurance, many businesses operate successfully without it. Sole proprietorships and LLCs with no employees often function well with no workers comp coverage.
However, certain industries face different requirements, particularly those working as subcontractors.
Which Solo Business Owners Most Often Need Workers Comp Coverage
Cleaning services, flooring specialists, carpenters, and similar contractors frequently discover they need workers comp coverage despite having no employees.
These businesses regularly work as subcontractors, where property owners and general contractors require proof of coverage before allowing work to begin.
How New York State Workers Comp Requirements Affect Solo Business Owners and Subcontractors
In New York State, workers comp requirements extend beyond just businesses with employees. As a subcontractor, you'll often discover that general contractors and property owners require proof of workers comp coverage before awarding contracts - even if you work alone.
Here's why: Under New York State law, if you get hurt while performing work for another business, that business becomes responsible for your injury-related costs on their workers comp policy. Most businesses and their insurance carriers aim to minimize this risk by requiring subcontractors to carry their own coverage.
Why Insurance Audits Create Challenges for Businesses Using Subcontractors
Insurance carriers conduct regular workers comp audits of their business clients. During these reviews, they examine all labor expenses, including payments to subcontractors.
When a business issues a 1099 form exceeding $600 for work performed without verifying the subcontractor's workers comp coverage, it creates a documentation trail that affects costs.
For example, if a Baldwinsville property management company pays $12,000 annually for janitorial services and $2,700 for window cleaning to uninsured contractors, their insurance carrier will add these amounts to their payroll calculations during the audit.
This often results in unexpected premium charges, and carriers may decline to continue coverage for businesses using uninsured subcontractors.
Coverage Options Available Through Standard Insurance Carriers
Some carriers offer options for owner-operators who maintain other business insurance policies with them. If you have general liability or business auto coverage, your carrier might provide a certificate-only workers comp policy.
With this option, you can exclude yourself as the owner from the policy's coverage—meaning while you technically have no covered employees (including yourself), you still receive the certificate needed to satisfy contract requirements.
However, New York's classification as a height-risk state creates limitations. Contractors working above ground level face significant difficulty securing coverage through standard carriers.
New York State Insurance Fund Requirements and Limitations
Many contractors, especially those in height-risk categories, must seek coverage through the New York State Insurance Fund. Unlike standard carriers, the Fund uses set industry payroll amounts rather than actual income.
For example, they might base a carpenter's premium on a standard $77,000 annual payroll, regardless of actual earnings.
How Payment Terms Can Affect Your Business Operations
A local contractor's experience illustrates common payment issues: After completing a $3,000 project in Liverpool, Dominick learns payment required proof of workers comp coverage. When Dominick discovers the annual premium will cost $4,200, he can't afford the coverage needed to collect payment for completed work.
How to Approach Workers Comp Requirements as a Solo Business Owner
Starting a contracting business involves understanding insurance requirements that affect payment terms. You want clear information about workers comp obligations and coverage options that work with your contracts.
The Horan insurance agency works with business owners throughout Central New York. We can provide information about coverage options that align with your operations and contracts.
Click the Get a Quote button below to learn about workers comp insurance from an agency familiar with local Central New York considerations.
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