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Workers' Compensation Insurance for Small Business
Coverage A Statutory: should expressly list 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 Insurance for a small business 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 coverage 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 Coverage by state law and fail to do so, you waive your "common law defenses" to protect yourself when you are sued by an injured worker. 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 you are audited by your Workers' Compensation carrier. 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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THE POLICY LANGUAGE REFERENCED IN THE COVERAGE DESCRIPTIONS AND THE OPINIONS IN THE COMMENTARY IS MERELY A SUMMARY FOR ILLUSTRATIVE PURPOSES ONLY AND IN NO WAY IS A STATEMENT OF COVERAGE AS ONLY THE ACTUAL POLICY ITSELF CONTAINS ALL OF THE COVERAGES, EXCLUSIONS, DEFINITIONS, AND CONDITIONS. A SPECIMEN POLICY FORM WILL BE PROVIDED FOR YOUR REVIEW UPON REQUEST.
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