If you run a business using 1099 subcontractors, it’s easy to assume you’ve avoided some of the insurance responsibilities that come with having employees—especially workers’ compensation.
We hear it all the time:
“I don’t have employees…just subcontractors.”
However, when it comes to insurance, it’s not always that simple.
There are some common misconceptions around 1099 subcontractors that can leave business owners exposed to claims, audits, or unexpected costs—especially when it comes to workers’ compensation. Let’s walk through the most common questions.
Do I still need insurance if I only use 1099 subcontractors?
Yes—most businesses still need general liability insurance, regardless of how workers are classified.
General liability helps protect your business if:
- A client or third party is injured
- Property damage occurs
- You’re sued over your work
Even if subcontractors are doing the work, your business name is often still on the contract. Because of that, you can still be held responsible.
👉 Bottom line: Using 1099 subcontractors does not eliminate your exposure.
Am I responsible if my subcontractor causes damage?
In many cases, yes.
Even if someone is a subcontractor, you can still be held liable for:
- Their workmanship
- Accidents on a job site
- Damage to a client’s property
For example, if you hired them directly or are overseeing the project, the client may still view them as part of your business.
Should my subcontractors have their own insurance?
Absolutely—and this is one of the most important steps you can take.
A subcontractor should carry their own:
- General liability policy
- Workers’ compensation (when applicable)
You should also:
- Request a certificate of insurance (COI)
- Verify it’s current
- Keep it on file
If I don’t have employees, do I still need workers’ compensation?
This is where things get misunderstood.
Many business owners assume:
“No employees = no workers’ comp.”
However, that’s not always how it works.
If you’re using subcontractors, someone still has to provide workers’ compensation coverage for those workers.
👉 Either:
- The subcontractor carries their own workers’ compensation policy
OR - They may be included in your policy exposure
What happens at audit if my subcontractors don’t have workers’ comp?
This is the piece many business owners don’t realize until it’s too late.
If a subcontractor does not provide proof of workers’ compensation coverage:
- They can be included in your payroll during your workers’ comp audit
- Your premium can increase—sometimes significantly
- The insurance company may treat them similar to employees for rating purposes
👉 In other words:
If they don’t have coverage, it often becomes your responsibility.
What if my subcontractor gets hurt and doesn’t have coverage?
This is where the risk becomes very real.
If a subcontractor is injured and doesn’t carry their own workers’ compensation:
- They may file a claim against your business
- You could be responsible for medical costs and lost wages
- It may create complications during audit or renewal
In industries like construction, this is one of the most common—and most expensive—gaps we see.
Can a waiver or contract protect me?
Contracts are important—but they don’t replace insurance.
Even if a subcontractor signs an agreement stating they’re responsible for themselves, that doesn’t override how state laws or insurance carriers view the relationship.
If a claim happens, the reality of the working relationship matters more than the paperwork.
How do insurance companies decide who counts as a subcontractor?
It’s not just about calling someone a 1099.
Carriers and state agencies may look at:
- Who controls the work
- Who provides tools or equipment
- Whether the person operates their own business
- How they are paid
If someone is misclassified, it can lead to:
- Additional premium during audit
- Backdated exposure
- Coverage complications
⚠️ A Common Misunderstanding
Many business owners believe that using subcontractors reduces their risk.
In reality, it can sometimes increase it—especially if:
- Subcontractors don’t carry their own insurance
- Workers’ compensation coverage isn’t verified
- Documentation isn’t kept up to date
👉 The key takeaway:
Someone has to cover those workers. There’s no scenario where they’re simply “uncovered.”
What should I be doing to protect my business?
A few simple steps can go a long way:
✔ Require certificates of insurance from subcontractors
✔ Always verify workers’ compensation coverage
✔ Keep documentation organized and up to date
✔ Don’t assume 1099 status equals reduced risk
✔ Review your setup regularly with your agent
Missouri Business Owners: What You Should Know
If you’re a business owner in Missouri, rules around subcontractors and workers’ compensation can vary depending on your industry.
You can learn more through the Missouri Department of Labor and Industrial Relations or the U.S. Small Business Administration.
However, the best approach is to review your specific situation and make sure your coverage aligns with how your business actually operates.
Final Thoughts
Insurance isn’t one-size-fits-all—especially when subcontractors are involved.
The biggest thing to understand is this:
👉 Workers don’t go uncovered. Either they carry their own policy, or the exposure often falls back on your business.
If you’re not completely sure how your current setup works, we’re always happy to talk it through with you.
👉 No pressure, just a conversation.