Workers’ Compensation Insurance

Coverage A Statutory:

  • Required by state law in the state or states where your employees or uninsured subs work

Coverage B Employers Liability:

  • Bodily Injury By Accident – $100,000 Each Accident
  • Bodily Injury By Disease – $500,000 Policy Limit
  • Bodily Injury By Disease – $100,000 Each Employee

Workers’ Compensation provides the following coverages to employees or uninsured subs who are injured “on the job”:

  1. 100% of all medical expenses
  2. 66 2/3% of lost wages
  3. lump sum for disability and disfigurement
  4. death benefit

Workers’ Compensation is required to be carried by most state laws if your company has paid 3 or more employees (including owners) or uninsured subs (including their employees) during a one year time period. If you are required to carry Workers’ Compensation by state law and fail to do so, you are subject to fines and penalties, as well as to liens equal to the amount of the benefits owed. This can have a catastrophic impact.

If you are using your own uninsured subs for a particular job, you should require them to provide evidence that they carry their own Workers’ Compensation insurance. They should provide a document called a “Certificate Of Insurance” that is currently dated. If they can’t provide this, you become their “statutory employer” under state law and are responsible for injuries to their employees.

If you carry your own Workers’ Compensation policy and use uninsured subs, the amount that you pay to them on a 1099 will be charged as your own payroll when your Workers’ Compensation carrier audits you. This is an expense that you must take into account as a cost of doing business. On the other hand, if they provide a “Certificate Of Insurance”, you are not charged a premium on their behalf.

You should definitely carry your own Workers’ Compensation policy if you are required to under state law or if you are working on a job where it is contractually required of your company. Even if none of these two situations apply, you should probably carry a policy anyway as the benefits to you or your injured employees are valuable and the cost of this policy is very inexpensive, usually less than 1% of payroll.

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