Do 1099 Contractors in California Need to Have Workers Comp Insurance?

Thang Truong
Thang Truong
Updated on:

In California, 1099 independent contractors are not considered employees by law. Therefore, they’re not required to have workers’ compensation insurance. However, we recommend that all 1099 contractors in California carry their own workers’ compensation insurance policy. Here’s why:

As an independent contractor, if you were to get injured on the job and could no longer work, you would be responsible for your own medical bills and lost wages. Workers’ compensation insurance would cover these costs so you would not have to bear the financial burden yourself. In addition, if your injury prevents you from returning to work, workers’ compensation will provide income replacement benefits until you are able to return to work or reach maximum medical improvement.

What does workers compensation insurance cover in California?

In California, workers’ compensation insurance covers medical expenses, temporary disability benefits, and permanent disability benefits for employees who are injured or become ill in the course of their employment. It also provides death benefits to the dependents of an employee who dies from a work-related injury or illness.

Who is required to have workers compensation insurance in California?

In California, employers with at least one employee are required to have workers’ compensation insurance. This includes full-time, part-time, and temporary employees.

Who is exempt from workers comp insurance in California? 

In California, some workers are exempt from workers comp insurance, including independent contractors, certain agricultural and domestic workers, certain real estate licensees, members of limited liability companies (LLCs), and certain sole proprietors. Additionally, some employers are exempt from having to provide workers compensation coverage by law. These include employers who have only one employee who is a spouse or minor child of the employer; employers whose annual payroll for employees is less than $100; and employers who exclusively employ casual labor.

Do you need workers comp insurance in California if you’re a 1099 contractor?

Even in general independent contractors or 1099 contractors are exempt from workers comp insurance in California as stated above, whether you need it as a 1099 contractor depends largely on the state laws you’re operating within, but it is generally recommended as it can help protect both you and your employer from serious financial difficulties if an accident were to occur. As a 1099 contractor, you’ll want to check whether or not you’re required by law to carry workers compensation insurance based on the specific state regulations and industry standards for your occupation. From there, you can make an informed decision about what coverage is best for your business.

The benefits of having workers compensation insurance as a 1099 contractor in California

As a 1099 contractor in California, there are significant benefits to having workers compensation insurance. Not only can it cover medical expenses, wages, or other losses related to job-related injuries, but it can also protect contractors from legal trouble and financial liability if they are involved in an accident on the job. Having proper coverage allows individuals to work without fear of not being able to pay for any medical expenses resulting from an unfortunate incident. Additionally, it helps provide peace of mind knowing that any costs associated with potential lawsuits will be covered by the policy. Ultimately, workers compensation insurance ensures that 1099 contractors are protected socially and financially when working in California.

The risks of not having workers compensation insurance as a 1099 contractor in California

As an independent contractor in California, it is essential that you acquire workers compensation insurance in order to protect both you and your clients. If you fail to do so, you may be putting yourself at financial risk should the situation arise that an employee or independent contractor is injured while working under your contract. Without workers compensation insurance, any medical costs associated with the injury are your responsibility, and a lawsuit could be filed even if the incident was not your fault. Beyond potential lawsuits, not having workers compensation insurance available also creates a difficult trust barrier between you and potential clients, as they may fear doing business with someone who does not take the legal requirements associated with their field seriously.

How much does workers compensation insurance cost in California and what factors affect the price?

On average, small businesses in California pays $2.25 per $100 payroll for workers comp insurance. This is considered one of the highest rates in the country.

The cost of workers compensation insurance in California depends on several factors including the type of industry, the size of the payroll, and the risk associated with a particular business. Generally speaking, employers in industries with high risks or relatively large payrolls will pay higher premiums than those with low-risk profiles or smaller employees. Additionally, an employer’s experience rating (based on claims frequency) could increase or lower the cost of coverage. Other potential factors that affect pricing include the number of employees and subcontractors, as well as the benefit levels offered.

Employers should do their research to compare several quotes to make sure they get the best rates available for their situation. We recommend the following:

How to get workers compensation insurance in California as a 1099 contractor

California’s workers compensation insurance can be essential for 1099 contractors, providing crucial coverage should injury or illness occur while on the job. To ensure protection and remain compliant with California state regulations, 1099 contractors must purchase workers compensation insurance from an authorized insurance provider or become self-insured. It is important to note that employers are typically responsible for paying most of the cost associated with this type of insurance; however, in some cases, independent contractors may be responsible for part of their own costs. Researching options and comparing quotes from several insurers will help you find a competitive rate that also meets your individual needs. Furthermore, ensuring that your insurer is approved by California’s Department of Industrial Relations’ Division of Workers’ Compensation should help give you peace of mind that your coverage is secure.

Here are the best workers comp insurance companies in California that we recommend for your consideration.

Other business insurance coverage that independent contractors in California should consider

In addition to workers comp insurance, 1099 contractors in California should also consider other critical business insurance coverage that helps protect them from financial ruins if some incident happens:

Commercial auto insurance

Independent contractors who use a vehicle for business purposes, such as delivering goods or providing transportation services, will likely need to have commercial auto insurance. It is required by California state law that if you use a vehicle for business purposes, you’re required to have commercial auto insurance. Personal auto insurance doesn’t cover you.

Commercial auto insurance provides additional coverage and protection for their vehicles, as well as their business interests. Commercial auto insurance offers more comprehensive coverage than personal auto policies, including higher liability limits that protect against potential lawsuits from third-party property damage or injury. Additionally, commercial auto insurance may cover the cost of repairs to a contractor’s vehicle if it is damaged in an accident, as well as provide rental car coverage if the vehicle needs to be repaired. Furthermore, commercial auto insurance can also cover medical expenses and lost wages incurred by an injured driver or passenger in an automobile accident.

General liability insurance

Independent contractors such as freelancers, consultants, photographers, web developers, handymen, plumbers, landscapers, and other contract workers who provide services to customers or clients should have contractors general liability insurance. This type of coverage helps protect a contractor’s business from potential claims resulting from bodily injury, property damage, libel or slander. It can also cover the cost of defending a lawsuit if someone were to claim they were hurt by the contractor’s negligence or that their property was damaged due to the contractor’s work. With this type of insurance in place, any legal costs associated with these claims are covered and the financial burden isn’t placed solely on the independent contractor.

Professional liability insurance

Independent contractors who provide professional services, such as accounting, consulting, engineering, legal advice and more should have contractors professional liability insurance. This coverage protects them from claims of malpractice or negligence when providing those services. It is important that independent contractors have this coverage in order to protect their business and assets if a claim is made against them for an error or omission they made while performing the services they are hired to do.

Thang Truong

Thang Truong covers small business insurance and small business success at BravoPolicy. He is a licensed P&C insurance agent. Previously, he held product leadership positions at, Capital One, NerdWallet, and Mulberry Technology. He holds a MBA degree from UC Berkeley - Haas School of Business.

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