What could happen if you don’t have Workers’ Compensation insurance?

What could happen if you don’t have Workers’ Compensation insurance?

Erika Malzberg
By Erika Malzberg
Feb 14, 2025
1 min read

We found some concerning uncertainty around workers’ compensation insurance in a recent survey of small business owners.

We know workers’ comp insurance may not always be top of mind for those who already have their hands full. And depending on your situation – like if you’re an independent contractor or a sole proprietor of a small business without any employees – you may think that this coverage isn’t necessary. Or maybe you think your business is already sufficiently protected by some other coverage like general liability insurance.

But going without workers’ comp insurance can lead to serious financial and legal consequences. It’s important to have the information you need to make the right insurance coverage choices for your business.

Jump ahead to learn:

NEXT Survey insights: How small business owners feel about Workers’ Comp

In our NEXT newsletter from January 2025, we asked small business owners and NEXT customers: Which of the following best describes your thoughts about workers’ comp for your small business?

Respondents representing a broad range of business types and sizes said:

  • 30.8%: “I don’t need it – Workers’ comp isn’t essential or required for my business.”
  • 26.9%: “It’s on my radar – I know workers’ comp is important, but I’m still figuring out what’s best for my business.”
  • 25.4%: “I’m not sure I need it – I don’t have workers’ comp and don’t know if it’s necessary for my business at this point.”
  • 16.9%: “I’ve got it covered! – I have workers’ comp and am confident about my level of coverage.”
WC BlogBanner V1

Breaking this down, we see that less than 17% of responding NEXT small business owners say they’re sufficiently covered for workers’ comp. While it may be the case that the remaining 83% don’t need the insurance, that seems unlikely.

WC V1 3

The fact that so many small business owners aren’t sure if they need workers’ compensation points to a critical gap in understanding. While it might seem like an unnecessary expense at first, the protection that workers’ comp provides — both for you and your employees — can be invaluable in the long run. And the best time to take a closer look at your insurance coverage needs is before an accident or incident.

Do you need Workers’ Compensation insurance?

When evaluating whether or not workers’ compensation coverage is essential for your business, here are four important factors to consider:

1. Workers’ Comp insurance is required by law in most states (if you have employees)

In many states, the law mandates workers’ comp coverage once you hire your first employee — and there are varying penalties for not having it.

2. Even if Workers’ Compensation isn’t mandated, it can provide important protection

For example, if an employee is injured while working, medical bills and lost wages could pile up fast. If you don’t have coverage, the financial burden of injured workers could be severe.

3. A Workers’ Comp policy can protect owners – not just employees

A common misconception is that workers’ comp is only to protect your business in the case of an employee injured or made ill from their job. This coverage can also benefit business owners, sole proprietors and independent contractors in any industry — especially in industries that involve physical labor or hazardous conditions.

 

Whether you’re a house cleaner who injures their back moving furniture or a graphic designer who suffers a work-related wrist injury, workers’ compensation can potentially provide valuable coverage for yourself, and help save you from unexpected out-of-pocket medical expenses.

3 risks of not having Workers’ Comp coverage

Even if your business is “low-risk” or you don’t have employees, accidents can happen – and workers’ comp may help cover medical bills and lost wages if they do. Let’s dig into some risks uninsured employers face.

WC V2 4

1. Major financial losses

One of the biggest risks of not having workers’ compensation is the financial burden of workplace injuries for employers. If an employee (or even you, as the business owner) has an on-the-job injury, workers’ comp can help cover medical expenses, lost wages, legal fees and other related costs.

At first, workers’ comp insurance might seem like an unnecessary expense. However, the cost of going without it could end up being far greater than the premium for the policy. A single accident could wipe out your business’s savings or force you to take on significant debt.

2. Legal consequences

If your state requires workers’ comp insurance but you don’t have it and an employee gets injured at work, you may be liable for the full cost of the injury. This could include defense costs in the case of legal action, damage for pain and suffering and any settlements. This could not only negatively impact your finances, but also the reputation of your business (and your ability to win new jobs).

3. Impact on eligibility for some contracts and professional licenses

In certain industries, workers’ compensation can be required for obtaining a license or winning a contract. For example, general contractors may need to show proof of workers’ comp insurance before bidding on jobs or applying for a business license.

Even if your work isn’t in a highly regulated industry, you could still face challenges if clients want proof of your coverage to ensure you’re financially protected in case of an accident.

How to get the Workers’ Comp coverage you need

Workers’ compensation insurance is relatively easy to obtain and, in many cases, it’s more affordable than you might think.

Here are some steps to get started:

  • Check your state’s requirements. Some states mandate workers’ comp as soon as you hire your first employee, while others have broader thresholds. Be sure to check your state’s laws and insurance rules to avoid potential penalties.
  • Consider your risks. Even if you don’t have employees, think about your own health and wellbeing. You might still need workers’ comp for yourself.
  • Get an instant quote. If you’re unsure about what kind of coverage you need, start by getting an online quote from an insurance provider. Insurance companies like NEXT will get you a customized quote based on your business’s specific needs in just a few minutes.
banner workers comp

How NEXT helps small business owners thrive

NEXT is 100% dedicated to helping self-employed individuals and small business owners find affordable workers’ comp and other types of essential small business insurance. We can create a customized insurance package to meet your unique needs.

Our services are online, so you can get an instant quote, review options and buy coverage in about 10 minutes. You’ll have immediate 24/7 access to your certificate of insurance as soon as you buy your insurance.

And if you need help, our team of U.S-based insurance advisors is standing by to help if you have any questions.

Start a free quote with NEXT today.

Erika Malzberg
About the author

Erika Malzberg is a writer and editor with 20+ years of experience. She has written for a wide range of audiences including small business owners, entrepreneurs, C-suite execs and job seekers with work appearing in Forbes, TechCrunch, Harvard Business Review, Vox and more.

When she’s not putting words together, you can find Erika exploring San Francisco on foot.

Grow and Protect Your Small Business

Get industry trends, tips from seasoned business leaders, data insights and more to help you protect your business investment.

Subscribe to the NEXT newsletter
Email*

By clicking “Sign Up Now,” you agree to the Terms of Use and Privacy Policy.

What we cover
Chat with Us

Mon – Fri | 8 a.m. – 5 p.m. CT

Facebook
Instagram
Tiktok
Twitter
Linkedin
Youtube
© 2025 Next Insurance, Inc. 975 California Ave, Palo Alto, CA 94304, United States
Better Business Bureau
Issuance of coverage is subject to underwriting. Not available in all states. Please see the policy for full terms, conditions and exclusions. Coverage examples are for illustrative purposes only. Your policy documents govern, terms and exclusions apply. Coverage is dependent on actual facts and circumstances giving rise to a claim. Next Insurance, Inc. and/or its affiliates is an insurance agency licensed to sell certain insurance products and may receive compensation from insurance companies for such sales. Policy obligations are the sole responsibility of the issuing insurance company. Refer to Legal Notices section for additional information.

** Coverage examples are for illustrative purposes only. Your policy documents govern, terms and exclusions apply. Coverage is dependent on actual facts and circumstances giving rise to a claim.

Any starting prices or premiums represented before an actual customer quote are not guaranteed and are representations of existing premiums of active policies as of December 6, 2023. To the extent permitted by law, applicants are individually underwritten, not all applicants may qualify. Individual rates and savings vary and are subject to change. Discounts and savings are available where state laws and regulations allow, and may vary by state. Certain discounts apply to specific coverages only.