Do You Need Extra Insurance if You Have a Home Business?

It Depends on Your State 

The laws surrounding worker’s compensation insurance vary from state to state. While some states may require you to purchase insurance, other states may not require you to purchase insurance. This could also depend on the number of employees you have. If you live in a state that requires you to purchase insurance, you should follow the law and purchase insurance. Failure to do so could land you both civil and legal trouble. Those who do have to purchase insurance need to be honest about the job descriptions of their employees. The job description will have a large impact on the premiums for each employee. For example, you’ll probably pay a lot more for woodshop employees than you will for receptionists. If you do need to purchase worker’s compensation insurance for your employees, you may have to purchase it for yourself too—even if you’re the only employee. Again, the laws in your state will dictate what you’ll have to purchase when it comes to worker’s compensation insurance. 

What’s Your Business? 

If you’re in a state where you do have to buy workers compensation insurance and you don’t, you may be facing significant financial fees and penalties from your state, who will otherwise have to cover your employee’s medical expenses. If you’re in a state where you do not have to buy insurance for your employees, you may be able to get by without it. However, if an employee does get injured, you will almost certainly be glad that you have the insurance. If you have a business where your employees are using a lot of heavy machinery—say you sell custom-made wood products that are manufactured in the shed in your backyard. If you have one or two employees who work with you, and they’re using power tools and operating heavy machinery, you’ll probably want to look into getting worker’s compensation insurance. However, if you’re an interior designer and your only employee is a bookkeeper who sits in your den all day crunching numbers, it might not be the end of the world if you decide not to purchase worker’s compensation insurance for them—provided that your state doesn’t require it and that bookkeeping is all that employee does.  

1099 vs Employee 

If you don’t want to pay for insurance, but your state does require it, you do have options. Instead of hiring employees, you can hire 1099 contractors. On the bright side, 1099 contractors are typically paid by the hour. Though they’re paid a higher rate, employers save since they don’t have to pay for worker’s compensation insurance, health insurance, etc. When an employee’s negligence causes someone else to sustain injury, the employer is generally liable for their employee’s negligence, as long as the employee was acting within the course and scope of their job description. However, this is not true for 1099 contractors. 1099 Contractors are considered to be self-employed, meaning the contractor themself is liable for any damages their negligence causes. 

Lyft, DoorDash, and InstaCart 

If you’re self-employed while driving for a service like Uber, you don’t need worker’s compensation insurance. However, you do need to review your car insurance. Some insurance companies require their customers to carry extra insurance when they’re participating in 1099 ventures that involve lots of driving. If your insurance requires you to have additional insurance when driving for Uber, and you don’t have it, your insurance company can refuse to cover you in the event that you cause an accident. Before you start driving for one of these services, contact your insurance company and review your policy. You’ll need to verify that you are indeed covered. Do not drive for these services without verifying that you have coverage in the event of an accident. Because Lyft and Uber Drivers are 1099/Independent contractors, Uber isn’t likely to cover their drivers in the event their negligence causes an accident. 

Lying to Save on Premiums 

Some employers and self-employed contractors may lie to save on insurance premiums. Worst case scenario, you’ve committed fraud, which can include criminal penalties. Best case scenario, the insurance company will refuse to cover you in the event of an accident, and then your business may be stuck paying any civil damages directly to an injured party.  Either way, it’s not a good idea, so don’t lie to save on premiums. If you’ve sustained injury at work, and you believe that you have a third party accident claim, contact Moxie Law Group today for a free consultation.