Small business owner reviewing an insurance policy document at their desk
Insurance June 2026 · 5 min read ✓ Reviewed for accuracy

What Is Workers' Compensation Insurance and Do You Need It?

Informational only. This article does not constitute insurance, legal, or financial advice. Coverage terms vary by carrier, policy, and jurisdiction. Full disclaimer.

Workers' compensation is the coverage that pays for an employee's medical bills and lost wages when they're injured on the job. If you have even one part-time employee in most states, you're legally required to carry it. Here's what you need to know.

Key rule: If you have employees (W-2 workers), workers' comp is almost certainly legally required in your state. The penalty for not having it can include fines, personal liability for claims, and potential criminal charges in some states.

What workers' comp covers

Who needs workers' comp?

SituationWorkers' comp needed?
You have W-2 employeesYes — in almost all states
You use 1099 contractorsDepends on state and classification
Sole proprietor, no employeesUsually not required (but sometimes required by GCs)
Sole proprietor in roofing or constructionSome states require it even for solo operators
The contractor trap: In many states, if you hire an uninsured subcontractor and they're injured on your job, you may be liable for their medical bills. This is especially common in roofing, construction, and landscaping. Verify that all subs carry their own workers' comp before they work on your jobs.

How much does it cost?

Workers' comp is priced per $100 of payroll, with rates varying dramatically by industry risk:

$0.30
Per $100 payroll — low risk (office work)
$5–$8
Per $100 payroll — landscaping, cleaning
$15–$30
Per $100 payroll — roofing

A cleaning company paying $80,000/year in wages at a $6/100 rate owes $4,800/year in workers' comp premiums.

How to get workers' comp

Three main options:

Bottom line: If you have employees, get workers' comp in place before their first day of work — not after. The risk of operating without it (fines, personal liability, criminal exposure) is far greater than the premium cost.
Thimble
A-rated GL, BOP, professional liability, and equipment coverage. Bind online in minutes — download your COI the same day.
Get a workers' comp quote → →

Get the FounderIgnite newsletter

Tips, insurance guides, and business resources — tailored to your industry. No spam, unsubscribe any time.

Which newsletters? (pick all that apply)

You'll get a confirmation email — click the link to activate your subscription.

FounderIgnite · 9169 W State St #1888, Garden City ID 83714 · Unsubscribe

Disclaimer: This guide is for informational purposes only and is not legal, tax, or insurance advice. Always verify specifics with a licensed professional in your state.