Updated 2026-11-01
Many businesses rely on subcontractors and 1099 workers. Workers comp rules in most states make the hiring business responsible, in some circumstances, for injuries to an uninsured subcontractor's employees. Insurers reflect that risk at audit.
Why certificates matter
When a premium auditor sees payments to subcontractors, the first question is whether those subcontractors had their own workers comp. A certificate of insurance is the standard proof. Without it, many insurers add the payments to your payroll at the rate for the work performed, which can produce a significant additional premium.
What to check on a certificate
- The subcontractor's legal name matches your contract and payments.
- The policy includes workers compensation, not just general liability.
- Policy dates cover the entire time the subcontractor worked for you.
- The states where the work happened are covered.
- Employers liability limits meet your contract requirements.
Certificates are informational only and do not change the policy. If a contract requires a waiver of subrogation or other endorsements, ask for confirmation that the endorsement is actually on the policy.
1099 workers are not automatically independent contractors
Issuing a 1099 does not decide whether someone is an employee for workers comp. States apply their own tests, often looking at control over the work, who provides tools, whether the worker runs an independent business, and whether the work is part of your regular operations. Misclassification can lead to audit charges and, in some states, penalties.
A simple process that works
- Require a current certificate before any subcontractor starts work.
- Track expiration dates and request renewals before they lapse.
- Keep certificates with your payroll and payment records for the audit.
- For sole proprietors without employees, ask whether your state offers an exemption certificate, and keep a copy.
Where this matters most
Certificate tracking is a daily task for general contractors and trades, for trucking companies that use owner-operators, and for new ventures that lean on outside help while they grow. Rules on statutory employers and exemption certificates differ by state, so check your state on the workers comp by state page.