6 Popular Myths about Workers’ Comp That Contractors Need to Be Aware of

Being an independent contractor means that you are responsible for your employees. This is especially true when it comes to workers’ compensation insurance. Unfortunately, there are many myths that some independent contractors fall prey to when they try to save a little money. It’s important to learn the difference between the myths and reality of workers’ compensation insurance and how the consequences associated with the myths can affect your business.

#Myth 1-  Transferring Your Assets to a Family Member Will Keep Them Safe

Irresponsible contractors may try to get away with transferring ownership of their assets to a family member so that they won’t have to pay for any claims that are filed against their business. This is risky in itself, but if you don’t have workers’ compensation for your employees, you will lose more than just the assets of your business; you will lose your credibility as well.

#Myth 2-  You Don’t Need to Carry Workers’ Compensation Insurance

Most states require contractors to carry workers’ compensation if they have four or more employees. However, it is a myth that an independent contractor with less than four employees doesn’t require workers’ compensation. The fact is, you still have to carry workers’ compensation insurance regardless of how many employees you have. If you fail to do so, you will be held responsible for all of the expenses incurred due to an employee-related claim, and you may also lose your legal right to fight the claim.

#Myth 3-  A Contractor Doesn’t Need Workers’ Compensation If Their Subcontractors Already Have It

Even though you hire subcontractors who may have their own workers’ comp policies, you are still required by law to carry a workers’ comp policy for your business. Just because the subcontractor has a certificate, it doesn’t mean they have insurance. If you don’t have workers’ compensation insurance and your subcontractor gets injured, you will be responsible for covering their injuries if their insurance isn’t in good standing.

#Myth 4-  An Owner Doesn’t Need Workers’ Compensation Coverage

If a business owner has health insurance that covers on-the-job injuries, then they may be able to get away with not having workers’ compensation coverage. However, for those who don’t have a health insurance policy, workers’ compensation insurance will protect them from financial loss.

#Myth 5-  If Your Subcontractor Isn’t Required to Carry Workers’ Comp, You Don’t Have to Deduct Premiums

Even when a subcontractor isn’t required to carry workers’ comp insurance, it doesn’t exempt the owner from deducting the premiums. This is true even if the subcontractor has signed an exemption form. A contractor must protect his business and carry the amount of coverage that is required by their state. This way, it doesn’t matter if your subcontractor is covered or not; your coverage will kick in when needed.

#Myth 6-  Lowering Payroll Estimates Will Save Money

Lowering your payroll estimates to lower your workers’ compensation premiums is extremely risky and, in some circles, may be considered as fraud. If it is determined that you have underpaid, you will have to make up the difference in premium amounts, or your policy will be canceled. If this happens, you will not be able to find another insurance company that will work with you.

As an independent contractor, it is up to you to get the answers you need and be as informed as possible about your workers’ compensation insurance. When you need answers, your first call should be to the professional agents at Artisan Insurance Solutions. We offer a full line of commercial insurance policies so that your business is fully covered. Contact us today to get started!

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