Last updated: November 22nd, 2022
Reviewed by
Grant Desselle
Licensed Insurance Agent
Definition:
Worker’s compensation insurance for contractors is a type of insurance that covers independent workers who are not employed full-time and instead do contract work for one or multiple companies.
According to healthcare.gov., a worker is self-employed if he or she has a business that takes in income but has no employees.
Worker’s compensation insurance covers illness and work-related injuries that could occur while a worker is on the job. In some cases, worker’s compensation also might help to replace lost wages.
Typically, the goal of worker’s compensation insurance is to shield a company from having to cover expenses for employees’ medical expenses.
Worker’s insurance compensation insurance helps to protect workers from having to pay high medical bills.
If you are able to get your insurance through means other than a traditional marketplace, you don’t need to get independent worker’s compensation. For example, you could check with your partner or spouse if you would be able to get worker’s compensation insurance through their employer or business, before starting your search.
Additionally, if you are under the age of 26, you could also ask your parents if their insurance provider offers worker’s compensation insurance for independent contract workers. Hunting for the right insurance provider is a time-consuming process that requires effort and insider knowledge, and you should resort to it only when you have exhausted other options.
Most health insurance policies do not cover work-related injuries and illnesses. Purchasing a workers compensation policy protects when the health insurance company denies claims because they occurred while working. Workers compensation can also provide benefits for any lost wages.
Where do I get independent worker’s compensation insurance?
There is an array of choices for buying a self-employed health insurance that range from the insurance marketplace to government insurance.
When shopping for your health insurance, consider the marketplace as your best option.
Marketplace allows you to choose several types of coverage, from low premiums to more comprehensive plans where you’ll pay more each month but less in case you need health services, according to healthcare.gov.
Check healthcare marketplace
You don’t want to end up buying a plan from the first company that comes along, that’s why you are better off going to a marketplace first, where an agent would help you find a type of insurance that matches your needs. This is also true if you qualify for subsidies because a marketplace is where you can find the right insurance provider.
See your options with Obamacare
Another option is to check Obamacare, or the Affordable Care Act (ACA), the health care marketplace that allows you to compare different health insurance options in your region or state. Navigating the Obamacare website can be confusing for first-time users, and if you are having trouble, you can consult with a professional who can explain the difference between various plans.
Many independent workers buy health insurance through the marketplace because all the plans listed on the exchange board meet basic government-mandated requirements, and thus, help you to cut back on unnecessary costs, which is not always the case with private insurance companies who tend to be less transparent.
For instance, all plans listed on the Obamacare website cover 100% of preventive care, and coverage can’t be denied due to a pre-existing condition.
There are five plan categories on the Obamacare exchange: catastrophic, bronze, silver, gold and platinum. For example, catastrophic plans are available only to people who are not able to afford health coverage and are under the age of 30. They also come with lowest possible premiums and highest deductibles.
On the other hand, bronze plans have high monthly premiums and low deductibles. Bronze plans work the best for people who need frequent medical attention.
Finally, those independent workers who qualify for a subsidy, should buy government insurance through the marketplace because it will allow the government to cover part of the premium. In case you are not eligible to receive a subsidy, the cost of your healthcare plan will be the same whether you will get it on exchange or somewhere else. To find out whether you are eligible, visit healthcare.gov.
Check Medicaid
Medicaid is a government website that provides flexible healthcare plans for low-income people. To qualify for Medicaid, your income should be below a certain threshold. This level is different from state to state, and also depends on other conditions like the number of family members, and their income levels.
To find out if you’re eligible, visit HHS.gov.
What things to avoid when shopping for independent worker’s compensation insurance?
When hunting for your health insurance, be aware that this industry has many traps that are very easy to fall into, especially if this is your first time on the market.
Avoid contacting private insurance companies for help, if you are new to the game. Calling up an independent insurance provider could make you an easy target for an insurance company that wants to sell you their plan.
Steer clear from COBRA
COBRA is a temporary extension of health insurance (sometimes up to 18 months) that is offered by some employers in the event when an employee loses his or her job. The major downside of COBRA, however, is that it’s prohibitively expensive. While you get to keep your old healthcare insurance plan, you will pay significantly more for it than you did before. In the event of a job loss, workers are qualified to enroll in the marketplace that offers access to more cost-effective plans, which makes COBRA the least attractive option.
How much does independent worker’s insurance cost?
If you are under the age of 30 and are relatively healthy, there’s a chance you don’t visit doctors more than a few times per year. In this case, you might not want to pay high insurance costs. However, lower monthly premiums come with significant downsides, as your deductibles are going to be higher, which means you will have to pay out of pocket before you are able to use your insurance.
Likewise, densely populated, urban areas tend to have higher insurance costs compared to rural places. To put it shortly, the price of a standard insurance plan for an independent worker could range from a few hundred to thousand dollars and upwards depending on their location, medical history and type of work.
Why you should not postpone getting your worker’s compensation insurance
When you switch to contact work, it’s easy to forget that you need to take care of your worker’s compensation insurance. While there might not be any immediate impact, the biggest problem with procrastination is that your risks are too high. Simply put, if you have an unexpected emergency and need to go to a doctor, you might have to foot a very high bill.
Many people think that things like a balanced diet, regular exercise and good sleep are enough to ward off healthcare expenses. While following a healthy lifestyle is a great idea, things like environmental factors and your heredity that could affect your health are outside of your control. That’s why getting worker’s compensation insurance sooner rather than later is a great idea. Not only will it give you peace of mind, it will also help you to avoid being on the hook for thousands of dollars for unexpected medical expenses.
References:
Brian is the founder and CEO of Insurist and carries Life, Health, and Property & Casualty licenses in all 50 U.S. states. Since 2013, Brian has been a member of Million Dollar Round Table, a designation for the top 1% of financial advisors worldwide. Brian has been featured in Yahoo! Finance, Money.com, Entrepreneur.com, Life Happens, Forbes, MSN, and Good Financial Cents. Brian’s goal is to show customers the best products, the quickest answers to their questions, and provide expert advice.
Grant's past experience includes work as a licensed sales agent for Hagerty Insurance. He has reviewed thousands of existing auto policies across the nation and issued hundreds of new ones on everything ranging from classic cars undergoing restoration to modern exotics and motorcycles.
