Understanding Occupational Accident Insurance and Workers' Compensation

We get a lot of questions from our clients about switching over to Occupation Accident Insurance. The most common around when it would make sense to consider OAI to cover contractors. If we had our way, we'd make sure that every contractor was covered with OAI. Because it's designed specifically for contractors and gig workers to cover against accidental injuries that occur while on the job -typically covers medical expenses, disability, and accidental death benefits. Where Workers' Compensation, on the other hand, is a state-mandated insurance program that provides benefits to employees who suffer job-related injuries or illnesses, including medical expenses, lost wages, and rehabilitation costs.

Workers Compensation is required for all W2 employees. But many people are learning about OAI for the first time as a coverage option for their contractor workforce, so we put together a guide to see if it's the right coverage for your contractors.

Factors For Occupational Accident Insurance

1. Number of Full-Time vs. Independent Contractors: Workers' Compensation is mandated by nearly every state to cover all W2 employees - but not for independent contractors. So a larger ratio of independent contractors to W2 employees is a great indicator that it may be a good time to switch to occupational accident insurance for your contractors.

2. Segmented Risk Pool: Occupational Accident Insurance allows businesses to be part of a segmented risk pool, which can result in lower premiums if your business has a good safety record. Conversely, workers' compensation premiums are typically based on the industry's overall risk profile, not just your business's record. So if you have a small group of contractors who participate in higher risk-type work than the rest of your workers. Occupational Accident Insurance is a great choice.

3. Length of Business History: Some states require a certain length of business history before a company can qualify for workers' compensation. If your business is new, or you are the only worker, occupational accident insurance may be your only option for the time being.

4. Speed of Producing a Certificate of Insurance (COI): If your business needs to produce a COI quickly, occupational accident insurance may be the better choice. This is because the process for obtaining workers' compensation can be lengthy and complex, especially in states with strict regulations.

5. State Regulations: While it is mandated by nearly every state that business must cover their W2 employees with Workers' Compensation insurance, the regulations around independent contractors vary from state to state. If your state requires you to cover all workers with Worker's Compensation regardless of wether they are employees or contractors, then you absolutely must cover them according to the law. However, if you live in a state in which Workers' Compensation does not cover casual employees or contractors, then Occupational Accident Insurance is the right choice to make sure your conractors are covered the right way.

Pros and Cons: OAI versus Workers' Compensation

Occupational Accident Insurance


  • Covers independent contractors
  • Potentially lower premiums with a good safety record
  • Faster process for obtaining coverage


  • May not cover all job-related injuries or illnesses
  • Benefits may be lower than workers' compensation
  • Some states mandate WC coverage for all employees

Workers' Compensation


  • Comprehensive coverage for job-related injuries and illnesses
  • Required by law in most states, protecting businesses from legal liability


  • May not cover independent contractors
  • Premiums can be high, especially for high-risk industries
  • Process for obtaining coverage can be lengthy and complex

Choosing between occupational accident insurance and workers' compensation depends on a variety of factors, including the nature of your business, the makeup of your workforce, and your state's regulations. It's important to weigh the pros and cons carefully and consult with an insurance professional to ensure you're making the best decision for your business and your employees.