What it covers
Workers' comp pays for medical bills, lost wages, and rehabilitation if an employee gets injured or sick because of the job. It also provides death benefits to dependents if a worker is killed on the job. In exchange, the employee generally cannot sue the employer for negligence.
- ▸ Emergency treatment and hospital stays
- ▸ Ongoing physical therapy and prescriptions
- ▸ Partial wage replacement during recovery
- ▸ Permanent disability or death benefits
- ▸ Legal defense if a claim is disputed
Who needs it
Most states require workers' comp as soon as you hire your first employee — sometimes even before that if you're a sole proprietor in a high-risk trade. Subcontractors are a common gray area: if they don't carry their own certificate, you may be on the hook during an audit.
W-2 employees
Almost always must be covered by state law.
1099 subcontractors
Verify certificates of insurance every year.
Audit traps to avoid
Workers' comp premiums are estimated up front, then reconciled at audit. Underreporting payroll or misclassifying workers can trigger a big bill at the end of the policy year.
- ▸ Keep payroll records by class code, not just totals
- ▸ Separate overtime pay from regular wages when allowed
- ▸ Document every subcontractor's certificate of insurance
- ▸ Report owner payroll correctly if included in coverage
- ▸ Review the auditor's worksheets before signing off
How to buy smart
Don't just compare premiums. Look at experience modification rate (EMR) impacts, dividend plans, safety dividend eligibility, and whether the carrier understands construction payroll.
State funds
Monopolistic states (WA, WY, ND, OH) require buying from the state fund.
Private carriers
Competitive states offer more options and potential dividends.
PEOs
Professional employer organizations can bundle workers' comp with payroll.
Pay-as-you-go
Premiums adjust with actual payroll each pay run, smoothing cash flow.
Workers' Compensation Insurance Carriers
We did the hard part for you. This is who most contractors use based on the CSLB website. Click through to each carrier to verify current rates, appetite, and appointed agents in your area.
