Knowledge Center
💥 Don’t Get Hit with a Surprise Workers’ Comp Bill — What First-Time Buyers Need to Know
Imagine this:
You just started your business, got workers’ comp insurance, and you're feeling good knowing you're covered. Fast forward a year — and BOOM — you get hit with a surprise bill from your insurance company. Thousands in back pay. Why? Because your payroll was underreported — and now you have to make up the difference.
🎯 Here’s the truth most first-time business owners don’t know:
When you buy workers’ comp insurance, your rate is based on your estimated payroll — not actual payroll. At the end of every policy year, the insurance company does an audit to see what you actually paid your employees.
If you paid more than you estimated, you owe the difference. And yes, it’s legally binding.
🧠 Why this happens (and how to avoid it):
Most new business owners lowball their payroll — sometimes to keep the premium low, or because they genuinely don’t know what to expect. That’s totally understandable.
But here’s the smart move:
✅ Start with your best guess. Then update it.
Once your business starts rolling and you get a better idea of actual payroll, just contact your insurance agent and adjust the numbers mid-year. It’s quick, easy, and can save you thousands come audit time.
🚫 Don’t Let the Audit Catch You Off Guard
This kind of thing happens to small business owners all the time. But now that you know the system, you’re ahead of the game. Stay flexible, communicate, and treat your workers’ comp policy like a living document.
You’ve got enough to worry about — don’t let an avoidable audit bill be one of them.
Need help getting started?
Let’s chat. We’ll walk you through the process, give you a realistic quote, and make sure you stay audit-ready all year long.
❓ Do I need workers' comp for independent contractors in California?
In most cases, you are not required to provide workers' compensation insurance for independent contractors in California. However, there are important exceptions and legal risks to understand:
✅ Key Points:
True Independent Contractors Are Exempt:
If the person working for you is legally classified as an independent contractor (per California law), you are generally not required to provide workers’ comp coverage for them.The ABC Test Applies:
California uses the ABC Test (from AB5 law) to determine whether a worker is truly an independent contractor. You must prove all three:A: The worker is free from your control/direction.
B: The work is outside your usual business.
C: The worker is independently established in that trade/profession.
🔍 If you fail the ABC Test, the state may reclassify the worker as an employee — and then you arerequired to provide workers' comp.
Misclassification Can Be Costly:
Employers who wrongly classify workers as independent contractors may face fines, lawsuits, and be held liablefor unpaid benefits, medical costs, and back insurance premiums.Some Businesses Choose to Cover Contractors:
Even if not required, some businesses choose to include independent contractors in their workers’ comp policy to protect against disputes or legal risk.