Workers Comp Insurance for Contractors in South Carolina

South Carolina requires workers compensation insurance for contractors with four or more employees. Independent contractors and sole proprietors are exempt under state law.

But exempt does not mean optional. General contractors, commercial clients, and licensing boards may all require proof of coverage before you set foot on a job site. Skip it, and you could lose contracts.

Do Contractors Need Workers Comp in South Carolina?

It depends on your business structure and headcount. Here is how SC Code Title 42 applies to contractors:

* Exempt from state mandate, but contracts and clients may still require it.

The Employee vs. Independent Contractor Question

Paying someone on a 1099 does not automatically make them an independent contractor. The tax form is not what matters. What matters is control.

The SC Workers’ Compensation Commission uses the right-of-control test. If you control when, where, and how someone does their work, they are an employee in the eyes of the Commission, regardless of how you pay them.

Here is what the Commission looks at:

Misclassifying an employee as a 1099 contractor is a serious problem. If that worker gets hurt, the SC Workers’ Compensation Commission can hold you liable for benefits, back premiums, and penalties.

Why General Contractors Require Workers Comp From Subs

Here is the short version: if your sub does not have workers comp and one of their workers gets hurt on your job, you pay.

Under SC Code Section 42-1-400, the statutory employer doctrine makes the general contractor responsible. The claim goes against the GC’s policy. The GC’s experience modification rate goes up. Premiums increase for three years.

That is why most Greenville-area GCs will not let you on a job site without a certificate of insurance (COI). No COI, no contract. It is not personal. It is math.

What Is a Ghost Policy?

A ghost policy is a workers comp policy with zero payroll. No employees. No coverage on yourself. It exists for one reason: to produce a certificate of insurance.

Sole proprietors and single-member LLCs use ghost policies to satisfy COI requirements from GCs and clients without actually insuring themselves.

In South Carolina, a ghost policy:

• Costs roughly $500 to $1,500 per year depending on your class code
• Lists you as an excluded owner (you waive your own coverage)
• Produces a valid COI that satisfies most GC requirements
• Must be audited annually like any other workers comp policy

If you hire even one employee during the policy period, you must report it at audit. The carrier will charge back-premium for the uncovered payroll.

Workers Comp Costs for Common Contractor Types

Your NCCI class code determines your base rate per $100 of payroll. Here are rates for contractor types common in the Greenville and Upstate SC market:

Rates are approximate and vary by carrier. SC carriers can apply schedule credits and debits of up to 25%, so shopping through an independent agent makes a real difference. For a full cost breakdown, see our guide on workers comp costs in South Carolina.

Who Pays for Workers Comp: the Contractor or the Hiring Company?

The employer pays. Workers comp premiums come out of the business, not the employee’s paycheck. But “who is the employer” gets complicated with contractors:

• W-2 employees: The company that issues the W-2 is responsible for covering them.
• 1099 contractors: Not covered by the hiring company. They are responsible for their own insurance.
• Subcontractors: Should carry their own policy. If they do not, the GC may be liable under the statutory employer doctrine.

Some GCs handle this by adding a line item to their bids for subcontractor insurance verification. Others simply refuse to work with uninsured subs.

SC Penalties for Not Carrying Workers Comp

Contractors who are required to carry workers comp but do not face real consequences:

The biggest risk is not the fine. It is losing the exclusive remedy protection. Without workers comp, an injured employee can sue the contractor directly for the full cost of their injuries, lost wages, pain and suffering, and punitive damages. One serious injury can bankrupt a small contracting business.

How an Independent Insurance Agent Helps Contractors

Contractors face unique insurance challenges. Your class code determines your base rate, but carriers price risk differently. One carrier may be competitive on electricians but expensive for roofers. Another may offer better rates for new businesses with no claims history.

An independent agent like The Morgano Agency shops your policy across multiple carriers. Beyond the quote, an agent helps with:

• Getting the right NCCI class code (wrong code = wrong price)
• Setting up a ghost policy if you need a COI but have no employees
• Bundling workers comp with general liability and commercial auto for multi-policy savings
• Preparing for annual premium audits
• Filing claims correctly when injuries happen on the job site (see our complete coverage guide for the full claims process)

Frequently Asked Questions

The Morgano Agency Inc
206B Pine Knoll Dr, Greenville, SC 29609
Phone: (864) 609-5285 | Fax: (864) 609-5689
Email: vic@morganoagency.com
Monday – Friday, 9:00 AM – 5:00 PM