Should Pool Companies Hire 1099s or W2s? What It Means for Your Insurance

Hiring subcontractors instead of employees might seem easier — but it could blow up your insurance. Here’s how 1099 vs W2 workers affect your pool company’s risk and coverage.

As a pool company owner, you’re probably wearing 10 hats — sales, estimating, scheduling, and sometimes even service calls. When the busy season hits, it’s tempting to bring in extra hands fast — usually as independent contractors (1099s). But doing it the wrong way can wreck your insurance and trigger IRS audits or denied claims.

Let’s break down how hiring 1099s vs W2 employees affects your coverage, compliance, and cost — and what you should do before adding your next worker.

What’s the Difference Between a 1099 and a W2?

• W2 Employee: You control how, when, and where they work. You provide tools, manage schedules, and cover payroll taxes.
• 1099 Contractor: They operate independently, bring their own tools, and invoice you for the job.

Sounds simple — but here’s where it gets messy…

The Insurance Risk No One Talks About

Let’s say you hire a 1099 helper to assist with pool installations. They fall off a raised deck and break a leg. Who’s paying?

If they don’t carry their own workers comp, the claim could land on you — especially if your policy doesn’t explicitly exclude subs or includes “if-any” coverage. Same goes for general liability — if they damage property, and they’re uninsured, you might be named in the lawsuit.

Key exposures with 1099s:

• Workers Compensation: You may still be liable if they’re injured on your job.
• GL Liability: If they damage a client’s property and aren’t insured, your policy may have to respond.
• Audit Problems: At year-end, your insurer asks if you used uninsured subcontractors. If yes, you could get hit with a surprise bill — sometimes thousands.

When Is It Safer to Hire W2 Employees?

If you’re managing the day-to-day work, training them, or providing trucks and tools — they’re functionally employees. It’s cleaner and safer to classify them as W2 and:

• Add them to your workers comp policy
• Include them in your payroll audit
• Avoid gray areas with state employment laws

It may cost a bit more upfront, but it prevents legal headaches and protects your business long-term.

What About Labor-Only Crews?

If you’re using a labor pool, staffing agency, or cash helpers “under the table,” be extremely careful.

• Cash pay is a red flag for both insurers and the IRS.
• Labor-only subcontractors (no insurance, no tools, no license) are almost always considered employees in an audit.

We’ve seen pool contractors get audited, reclassified, and fined — all because their “1099” tech didn’t pass the test.

How to Protect Your Business Either Way

Whether you use W2s, 1099s, or a mix, McKnight Insurance recommends:

• Collect COIs (Certificates of Insurance) from all subcontractors
  • Require General Liability AND Workers Comp
  • Ask to be listed as Additional Insured and get a Waiver of Subrogation
• Review your policies for subcontractor language
  • Some GL policies exclude subcontracted work or apply higher deductibles
• Classify payroll properly in audits
  • Break out clerical, field labor, and subcontracted labor clearly
• Use written contracts
  • Clarify scope of work, pay terms, insurance requirements, and dispute resolution
• Talk to your agent BEFORE hiring
  • We can help you structure the relationship correctly to avoid issues

How McKnight Helps Pool Companies Get It Right

At McKnight Insurance, we don’t just issue policies — we help you understand how your hiring decisions affect your coverage. We’ll:

• Review your setup before busy season
• Adjust your GL and WC policies to avoid audit surprises
• Find the right balance of cost, control, and compliance

Call Before You Hire

Whether you’re scaling up for summer or subcontracting installs, let’s make sure your insurance has your back.

Call McKnight Insurance today or schedule a 15-minute risk review.
We’ll keep your business growing — without exposing it to legal or financial landmines.