Short answer
Do I need workers comp with no employees? Often not, but your state and entity type decide. Some states require coverage from the first employee, and many states do not require it for a sole owner. Contracts can also require a workers’ comp certificate even when state law does not. Check your state agency and your contract before you assume you are exempt.
Do I need workers comp with no employees? State rules decide
Every state sets its own rule based on the number of employees and the type of business. Some states require coverage as soon as you hire your first employee. On one call, a firm owner mentioned that Colorado requires it upon hiring the first employee.
Because the rules differ so much, your state workers’ comp agency is the best place to confirm your situation. We don’t publish a state-by-state list here, since each state’s rules would need to be verified and can change. If you want a quick refresher on the basics, our glossary entry on workers compensation is a good starting point.
Should owners include or exclude themselves from workers comp?
Many policies let owners or officers choose to be included or excluded, depending on the state and the entity type. Excluding yourself lowers the premium because your payroll is not counted. It also means you have no workers’ comp coverage for your own work injuries.
From our calls, we often see that owners who visit job sites do better keeping themselves on the policy. As one person put it, “If you’re paying for the insurance anyway, I would keep myself on there.”
Owners often ask what a signed officer exclusion waiver is. It is the form that documents your choice to exclude yourself. The form and the rules around it vary by state.
Workers comp is not disability insurance
Owners often confuse the two. Workers’ comp pays medical bills and lost wages for work-related injuries. Disability insurance is a separate product, and we do not sell it.
If you want protection for an injury or illness that happens outside of work, workers’ comp will not provide it. Workers’ comp policies also usually come paired with employers liability coverage, which responds to certain lawsuits tied to an employee’s work injury. Policy terms and state rules control what applies.
How new hires get picked up at audit
When you hire your first employee, you usually don’t need to call in and report it. The carrier reconciles your actual payroll at audit after the policy term ends.
That still leaves a question many owners ask: if we hire someone, are they just covered? Coverage for employees generally depends on the policy being in place and the right class codes and payroll being reported. Update your insurance agent when you hire so your estimate stays realistic. Our article on how workers’ comp audits work explains what the carrier reviews.
Can contracts require workers comp with no employees?
Yes. Clients and public entities often ask for a workers’ comp certificate, sometimes with a waiver of subrogation. This can happen even when your state does not require coverage.
If you have no employees, some clients accept a written statement or an exemption form instead. Check the contract language and ask the client what they will accept.
Using a PEO and your workers comp policy
If a professional employer organization (PEO) covers your staff, your own workers’ comp policy may be cancelled or need changes. This is a common surprise, and our article on workers’ comp cancelled after joining a PEO walks through what can happen. Check with your insurance agent before you add or remove either policy.
What we see at Hardcover
Two partners setting up an LLC planned to pay themselves a salary as W-2 employees. That changed their answer. Once they were employees of the company, workers’ comp became a question they needed to answer for the business.
What to check
- What does your state workers’ comp agency say about your entity type?
- Do you plan to hire, and when?
- Does your contract ask for a certificate, a waiver of subrogation or an exemption form?
- Do you want to include or exclude yourself, and what does your state allow?
- Does a PEO already cover anyone in your firm?
Related questions
Do I need workers comp if I’m the only person in my firm?
It depends on your state and entity type. Many states do not require it for a sole owner, but contracts may.
Can I exclude myself from my firm’s workers comp policy?
Often yes, depending on your state and entity. It lowers premium but removes your own coverage.
Is workers comp the same as disability insurance?
No. Workers’ comp covers work-related injuries. Disability insurance is a separate product.
Do sole proprietors get workers comp for themselves?
Some can, and some states limit it. Ask your insurance agent what your state and carrier allow.