Here's something that catches a lot of self-employed people off guard: you're technically exempt from workers' compensation insurance. If you're a sole proprietor, partner, or LLC member running a one-person show, most states don't require you to carry it. But here's the catch—just because you don't have to doesn't mean you shouldn't.
Voluntary workers' compensation is exactly what it sounds like: insurance coverage you choose to buy for yourself, even though the law doesn't make you. And while it might feel like an unnecessary expense when you're bootstrapping a business, it's often the difference between recovering from an injury and losing everything you've built.
What Is Voluntary Workers' Compensation?
When you have employees, workers' compensation insurance is mandatory in almost every state. It covers their medical bills and lost wages if they get hurt on the job. But what about you, the business owner? If you trip over a ladder at your own job site or develop carpal tunnel from years at your desk, who pays?
Without voluntary workers' comp, you do. Out of your own pocket. Your regular health insurance probably won't help either—most health plans explicitly exclude work-related injuries. That means if you're injured while working, you could be stuck paying thousands in medical bills plus zero income while you recover. For a self-employed person, that's a recipe for financial disaster.
Voluntary workers' compensation fills that gap. It works the same way regular workers' comp does: if you're injured on the job, it pays your medical expenses and replaces a portion of your lost income while you heal. It's sometimes called owner's coverage or elective workers' comp, depending on your state.
Who Should Consider Voluntary Coverage?
The short answer? Anyone who works for themselves and can't afford to lose income if they get hurt. But let's get specific about who benefits most from voluntary workers' comp.
Sole proprietors and partners are the classic candidates. If you're running a business without employees—whether you're a freelance contractor, consultant, photographer, or plumber—you're legally exempt from coverage in most states. But you're also on the hook for everything if you get injured.
Independent contractors often need voluntary coverage for another reason: client requirements. If you work in construction, many general contractors won't let you on site without proof of workers' comp insurance. Some states, like Florida and Louisiana, actually require contractors to cover independent contractors in certain industries. Even if your state doesn't mandate it, landing big contracts often depends on having this coverage.
High-risk professions should seriously consider voluntary coverage. If you're a roofer, electrician, landscaper, or anyone who works with heavy equipment or at heights, your injury risk is significantly higher than someone who works from a home office. The more dangerous your work, the more sense voluntary workers' comp makes.
Why Your Health Insurance Isn't Enough
A lot of self-employed people figure they're covered because they have health insurance. But here's the thing: health insurance and workers' compensation serve completely different purposes.
Most health insurance policies specifically exclude work-related injuries. Check your policy—there's probably language in there that says if you're hurt on the job, they won't pay. Even if your health insurance does cover the medical bills, it won't replace your lost income. And when you're self-employed, lost income is often the bigger problem.
According to recent data from the National Academy of Social Insurance, around 20 million jobs in the United States lack workers' compensation coverage. The Department of Labor found that workers and their families now bear 63% of the cost of workplace accidents, while the workers' comp system covers just 21%. For self-employed individuals without voluntary coverage, that burden is 100%.
Workers' compensation also covers you regardless of who's at fault. If you cause your own injury through a momentary lapse in judgment, your health insurance might deny the claim. Workers' comp doesn't care—it pays either way. Plus, it provides benefits like vocational rehabilitation if you can't return to your previous work, something health insurance never covers.
What Does Voluntary Workers' Comp Cost?
The cost varies widely based on your industry, your state, and how much income you want to insure. Construction trades pay more than office-based consultants because the injury risk is higher. A landscaper in California will pay different rates than a landscaper in Texas.
The good news? Workers' comp costs have remained competitive in 2024. Industry data shows premiums grew by only 1% in 2023, and many insurers are offering rate reductions rather than increases. Employer costs for workers' compensation are actually at a 40-year low as a percentage of overall compensation costs.
For most self-employed individuals, voluntary coverage costs anywhere from a few hundred to a few thousand dollars per year. High-risk occupations like roofing or tree removal will be on the higher end. Lower-risk work like consulting or graphic design will be cheaper. Your insurer will base your premium on your estimated annual income and your occupation's risk classification.
One thing to remember: voluntary workers' comp premiums are typically tax-deductible as a business expense. That takes some of the sting out of the cost. And compared to the alternative—paying for a serious injury entirely out of pocket—it's usually a bargain.
How to Get Voluntary Workers' Compensation
Getting voluntary coverage isn't complicated. Start by contacting workers' compensation insurance carriers in your state. Many of the major business insurers offer voluntary policies, and there are also specialty carriers that focus on self-employed individuals and small businesses.
You'll need to provide information about your business structure, your occupation, and your estimated annual income. The insurer will assign you a classification code based on your work, which determines your base rate. From there, they'll calculate your premium based on how much income you want to insure.
Shop around and compare quotes from multiple carriers. Rates can vary significantly between insurers, even for the same coverage. Also check whether your state has a competitive market or a state fund system—some states offer workers' comp through a state-run program in addition to private insurers.
If you're required to show proof of coverage to clients or for specific contracts, make sure you understand exactly what they need. Some may want to see a certificate of insurance with specific coverage limits. Your insurance agent can help you get the right documentation.
Being self-employed comes with incredible freedom, but it also means you're your own safety net. Voluntary workers' compensation isn't the most exciting insurance purchase you'll make, but it might be one of the smartest. One serious injury without coverage could wipe out years of hard work. With it, you can focus on building your business knowing you're protected if something goes wrong.
