Does My Business Need Workers Comp?

This is a pretty common question I get from our small business owners; whether or not you need to have a workers comp. policy or not. If you do an event and have a booth at a tradeshow, go on site to a client, or have a contract with a vendor, they’ve probably sent you a list of insurance requirements. This is going to spell out your general liability, auto insurance, and workers compensation requirements.

If you have a W2 employee then it’s pretty straight forward and you do need a policy. If you’re a sole proprietor who truly works by yourself and don’t have any payroll, then a policy is not required. Likewise if you’re an LLC or a corporation, you may either not need coverage, or may be able to exclude owners. A corporation can exclude owners and executives, and individuals with an ownership stake in the business (check with your carrier for requirements). It isn’t until there is a W2 employee on the payroll who isn’t part of the ownership structure that you need a policy.

What Does An Additional Insured Mean For a Contractor?

Contractor Additional Insured (AI’s): What are they, how do they work, and why do companies require them?

On the surface, an AI is exactly what it sounds like; the business or person is also insured under your policy for the work or project you’re doing. This makes it so your landlord, general contractor, or other additional insured can file a claim directly against your policy and get protection for damage you cause, rather than filing against their own policy. There are several AI forms, and they operate in different ways depending on what the AI’s interest is in your work. Here are a couple common scenarios involving the more “standard” forms before we dive into more complex areas:

Construction Workers image

Landlord listed as an AI:

Very common when you’re leasing an office, shop, or yard. If you get sued for an injury at your office (someone trips and falls, etc.), this extends coverage to your landlord if they get wrapped into the lawsuit as well.


Similar to the landlord AI. If the lender gets wrapped up in a lawsuit for property damage or bodily injury, your policy will help defend them.

Vendors and companies leasing you equipment:

If you rent construction equipment, and cause damage or injury with it, an additional insured in favor of the rental company protects them if they’re dragged into a claim or lawsuit.

A business you’re doing work for:

If you injure someone at a business’s location, or cause damage to their building or property, an AI will let them file a claim directly to your insurance, rather than needing to use theirs first.

Another contractor:

The contractor can file a claim against your policy rather than theirs if you damage something. The general contractor is ultimately responsible for damage to the project because they hold the contract with the client. If a sub causes a fire or their machinery damages a structure, an AI in favor of the general contractor allows the GC to file a claim directly with the sub’s insurance policy.

Won’t my insurance cover damage I cause though? Why do they need me to list them as additional insured on my policy?

Simply put, an AI provides a straight path for a landlord or contractor to file a claim. If you’ve caused damage, the AI can immediately get the claim rolling, and they can go through your policy rather than their own. There usually won’t be the question of “does this person have insurance?”, and an AI endorsement formally shifts more of the responsibility onto your policy.

The certificate holder clause says that the insurance company will notify the additional insureds in a timely manner if the policy is being canceled, so that gives an additional layer of protection for the AI.

In the next article, we’ll dive into the 4 most common additional insured forms, how to interpret them, and what you need to look out for. We’ll also go over what “primary wording” and “waiver of subrogation” forms are.