If your Indiana workers are paid on a 1099, that label does not decide whether you need workers compensation. Indiana looks past the paperwork and uses the federal right-to-control test to decide who is really an employee, and a worker you direct like an employee will count as one no matter what the form says. If your 1099 workers are really employees under that test, you have to cover them.
Who this is for: Indiana owners who pay some or all of their workers on a 1099, including contractors, delivery and trucking operators, and shops that use freelancers or day labor.
The short version
- A 1099 does not settle it; Indiana uses the federal right-to-control test to decide employee status.
- Indiana does not use the stricter checklist some states use, the ABC test; it follows the IRS control factors.
- Workers who are really employees must be covered, whatever their tax form says.
- A true independent contractor can file for a state exemption certificate to document their status.
- A general contractor can be made to pay for an uninsured subcontractor's injured workers.
The test Indiana actually uses
For workers comp, Indiana follows the federal right-to-control test used by the IRS. It looks at the whole relationship through three lenses: behavioral control (do you direct how the work is done), financial control (who supplies tools, who can profit or lose), and the relationship of the parties (is the work ongoing and central to your business). A common mistake is to assume Indiana uses the strict three-part ABC test that some states apply. It does not; Indiana points to the IRS criteria, so someone can be your employee even if you both signed a contractor agreement and send a 1099.
| Factor | Points toward employee | Points toward contractor |
|---|---|---|
| Control over how the work is done | You direct the methods and steps | They decide how to do it |
| Tools and equipment | You supply them | They bring their own |
| Set hours and location | You set them | They set their own |
| Other clients | They work only for you | They serve many clients |
| How they are paid | Hourly, like a wage | By the job, with their own invoice |
The Indiana exemption certificate
Indiana gives a genuine independent contractor a way to document their status on paper. The contractor files a statement with the Indiana Department of Revenue and obtains a Worker's Compensation Exemption Clearance Certificate, which requires their state tax filings to be current and carries a 20 dollar application fee. They then file a certificate of exemption with the Worker's Compensation Board, with a 15 dollar filing fee, and it takes effect at midnight seven business days after the Board file-stamps it. The exemption has to be renewed every year. This is how a true independent operator shows they are outside your comp, and it is a useful paper trail when you hire subcontractors.
If you hire subcontractors
Using genuine subcontractors is fine, but one Indiana rule protects you only if you handle it right. A general contractor that sublets work can be made to pay comp for an uninsured subcontractor's injured workers, to the same extent the subcontractor would owe. The safe move is to collect proof of coverage from every sub before work starts, a certificate from the Board or the sub's insurer, so an uninsured sub never becomes your claim. A solo sub with no employees is not required to carry comp on themselves, which is why many keep a low-payroll policy just to produce that certificate.
An Indianapolis trucking example
Illustrative, not a quote. An Indianapolis delivery company pays six drivers on a 1099 and treats them as contractors, but it sets their routes, schedules their shifts, and requires company-branded vans. Under the IRS right-to-control test those drivers look like employees, so the company likely needs to cover them. We help the company sort genuine owner-operators, who can file the state exemption certificate, from drivers who are really employees who must be covered, and collect certificates from the true independents. See our workers comp for trucking businesses page.
Real questions Indiana owners ask
Do I need workers comp for 1099 contractors in Indiana?
It depends on whether they are really employees. Indiana uses the federal right-to-control test, not the tax form, so a 1099 worker you direct and control usually must be covered like any employee.
Does a 1099 or a signed contract make someone a contractor?
No. Indiana looks at the real relationship, not the paperwork. If you control how, when, and where the work is done, the worker can be an employee for comp even with a 1099 and a signed agreement.
I heard some states use a stricter ABC test. Does Indiana?
No. Indiana follows the IRS right-to-control factors for workers comp, not the strict three-part ABC test. It weighs behavioral control, financial control, and the relationship of the parties.
How does a real contractor prove they are independent?
They can file for a state exemption certificate. The contractor gets a clearance certificate from the Department of Revenue and files a certificate of exemption with the Worker's Compensation Board, renewing it each year.
Am I responsible for an uninsured subcontractor's injured worker?
You can be. A general contractor that sublets work can be made to pay comp for an uninsured sub's injured workers, so confirm every sub carries coverage and collect a certificate before work starts.
Do solo subcontractors need their own workers comp?
Not always on themselves, but many carry a low-payroll policy anyway so they can give you proof of coverage. Getting that certificate protects you from being stuck with their injury.
How do I tell a real contractor from an employee?
Look at control. A real contractor decides how to do the work, uses their own tools, sets their own hours, serves other clients, and bills by the job. The more you control, the more they look like an employee.
Why Indiana owners choose Morrow
- We shop the right market for you. In Indiana you buy workers comp on the open, competitive market from any private insurer licensed in the state, because there is no state fund, and if no carrier will take you the state's assigned risk plan is the guaranteed backstop, so we can shop your rate freely and still have a fallback for hard-to-place work.
- We catch pricing mistakes. Your price depends heavily on the category your work falls into for pricing (the class code). Put people in the wrong category and you overpay for years. We review your payroll and classifications before you buy.
- Proof of coverage, fast. Need a certificate (proof of coverage) for a general contractor or a landlord before Monday? We turn those around the same business day for most carriers.
- We help lower the score that drives your price. Insurers give you a score based on your past claims that raises or lowers your cost (the experience modification rate). We review it each year, flag errors, and connect you with return-to-work and safety resources that bring it down.
- Real people when a claim happens. When someone gets hurt, we stay involved through the life of the claim, not just at renewal.
Related Indiana guides
Every Indiana business is set up a little differently. These companion guides answer the same question for other situations, plus the national explainers behind the terms used here.
- Business insurance in Indiana (start here)
- Workers comp: the owner's overview
- I own an LLC: do I need workers comp?
- I'm a sole proprietor: do I need workers comp?
- I own a corporation (C-corp or S-corp): do I need it?
- We're a partnership: do we need workers comp?
- We're a nonprofit: do we need workers comp?
- Only part-time or seasonal staff: do I need it?
- I only employ family: do I need workers comp?
- Remote or out-of-state staff: do I need coverage?
- What happens if I don't carry workers comp?
- How much does workers comp cost?
- How do I get workers comp (even if turned down)?
- What insurance do I need for a contractor license?
- Workers compensation insurance, explained
- What workers comp costs (national guide)
- Do I need workers comp for 1099 contractors?
- What is a ghost workers comp policy?
- Indiana trucking workers comp
This guide is general information, not legal advice. Indiana rules and penalty amounts can change, so verify current requirements with the Worker's Compensation Board of Indiana or a licensed advisor before you rely on them. Last updated: July 2026.