Short answer: Yes. Indiana requires most employers with one or more employees to carry workers' compensation or be approved by the Worker's Compensation Board to self-insure. Sole proprietors and partners aren't required to cover themselves, but they must cover any employees. Independent contractors in construction trades who don't elect coverage need a clearance certificate.
The rule
Under Indiana Code §22-3-5-1, employers subject to Indiana's workers' compensation law must insure payment of compensation with an authorized insurer or qualify as a self-insurer. The Worker's Compensation Board of Indiana handles compliance.
There's no small-business threshold in the way Georgia, Virginia or Tennessee have one. A business with one employee, full- or part-time, generally needs coverage.
Who's excluded
Indiana law excludes some workers or lets them opt out, including:
- Sole proprietors and partners, for themselves, unless they elect to be covered.
- Certain LLC members and corporate officers who properly elect not to be covered.
- Casual laborers whose work isn't in the usual course of the business.
- Some farm and agricultural workers, household domestic workers and real estate professionals under specific conditions.
Owners who exclude themselves still must cover their employees.
Clearance certificates for independent contractors
Indiana has a specific process for independent contractors. A sole proprietor or partner who works as an independent contractor and doesn't elect coverage can apply to the Board for a Worker's Compensation Clearance Certificate using form WCE-1. Contractors in the construction trades must obtain the certificate; other independent contractors may obtain one. The WCE-1 application explains that the certificate is valid for one year and must be renewed.
Hiring businesses often ask for the certificate before work begins. Without it, the hiring business may be treated as responsible if the contractor is injured.
Enforcement
The Board can investigate employers without coverage. Penalties can include fines, and an injured worker of an uninsured employer may seek benefits from the employer directly. Contractors who hire uninsured subcontractors can also be held liable for the subcontractor's injured workers in some cases.
Buying coverage
Indiana has a private market. Employers that can't find coverage voluntarily can use the Indiana assigned risk plan. Large employers can self-insure with Board approval. Small businesses often bundle workers' comp with general liability and property coverage. See our business owners policy (BOP) guide.
What a policy covers
Workers' comp pays medical expenses, temporary total disability benefits, permanent partial impairment benefits and death benefits for job-related injuries and illnesses. Employer's liability (Part Two) responds to certain lawsuits related to workplace injuries. See our workers' compensation insurance page.
Premiums
Premiums are based on payroll, classification codes and, for larger employers, an experience modification factor. Expect a payroll audit after each policy term. If you hire uninsured subcontractors, insurers may add their payroll to yours at audit, which is another reason to collect certificates of insurance or clearance certificates before work starts.
Common scenarios
You open a hair salon and hire one part-time stylist. That's one employee. You need coverage, unless the stylist is genuinely an independent contractor.
You're a solo electrician without employees. You don't have to cover yourself, but general contractors will likely require a clearance certificate.
You hire a subcontractor without a clearance certificate or policy. If the subcontractor is hurt, you could be responsible.
You and your business partner run a landscaping company with no employees. Partners aren't required to cover themselves, but adding seasonal workers changes that.
Key terms
- Clearance certificate (WCE-1): a Board-issued certificate for independent contractors who don't carry coverage.
- Self-insurer: an employer approved to pay claims directly.
- Casual laborer: someone whose work isn't part of the usual course of business.
- Assigned risk plan: coverage of last resort.
Questions to ask your broker
- Do I need coverage for myself or only my employees?
- Should I get a clearance certificate?
- How should I verify subcontractor coverage?
- Are my classification codes accurate?
Bottom line
In Indiana, the first employee triggers the workers' comp requirement. Independent contractors in construction need clearance certificates if they don't carry coverage, and hiring businesses should collect them.
Contact Alishahi Insurance or call (877) 711-4545. See insurance in Indiana.
Frequently asked questions
Is workers' comp required in Indiana?
Yes, for most employers with one or more employees.
Do sole proprietors need workers' comp in Indiana?
Not for themselves unless they elect coverage, but they must cover employees.
What is an Indiana clearance certificate?
A certificate from the Worker's Compensation Board for independent contractors who don't carry coverage. Construction-trade contractors must obtain one.
How long is a clearance certificate valid?
One year. It must be renewed.
Can Indiana employers self-insure?
Yes, with approval from the Worker's Compensation Board.
Alishahi Insurance · 439 N Canon Dr, Penthouse, Beverly Hills, CA 90210 · (877) 711-4545 · CA License #4348151. General information only. This isn't legal, tax or financial advice or a coverage determination. Coverage depends on policy language and underwriting, and rules vary by state.