Contractor Insurance You Can Trust

Do I Need Workers Comp If I Only Hire Subs?

Using only 1099 subcontractors reduces your workers comp exposure — but it doesn’t eliminate it. Here’s what you still need.

• ✓Uninsured subs can be charged to your payroll at audit
• ✓A ghost policy satisfies COI requirements even with zero employees
• ✓Some states require coverage regardless of whether workers are W-2 or 1099
• ✓Contract requirements often mandate coverage independent of employee status

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The Legal Requirement When You Only Use Subs

Most states base the workers comp mandate on whether you have employees — defined as W-2 workers. If you have no W-2 employees and work exclusively with 1099 subcontractors, you’re often not legally required to carry workers comp for your own operations.

However, state licensing boards, GC contracts, and commercial client requirements frequently require proof of workers comp regardless of employee status. A ghost policy — with an owner exclusion, no covered employees, minimum premium — satisfies all of those requirements without triggering a mandatory coverage obligation you don’t otherwise have.

The situation also changes immediately if you hire even one W-2 employee. That first hire triggers mandatory coverage in most states, and you need to add them to a policy right away.

The Audit Exposure from Uninsured Subs

Even without W-2 employees, using uninsured 1099 subcontractors creates a specific audit exposure. Standard workers comp policies include an uninsured subcontractor clause — if you pay a sub who can’t provide a valid COI, the carrier treats their labor as your payroll and charges premium.

If all your subs carry their own workers comp, collect their certificates before each project, and maintain those files through audit, your exposure is minimal. The certificates document that the sub-related labor was covered elsewhere.

The practical answer for most GC-type operations that use all subs: carry a ghost policy for COI purposes, collect certificates from every sub, and maintain a certificate file that covers your audit. This structure costs $500–$1,500 annually and eliminates all the significant exposures.

You Might Also Find Helpful

• Ghost Workers Comp Policies for 1099 Contractors
• Subcontractor Workers Comp Requirements
• Workers Comp Audits — What to Expect
• Does Workers Comp Cover Subcontractors?

Sub-Only Operation? We Have the Right Structure for You.

Ghost policy plus a certificate tracking system is all most sub-only contractors need. We set it up in one call.