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Workers' Compensation Insurance FAQs

Author: Christina Galoozis Date: May 02, 2011

Workers' compensation laws vary from state to state, but there are some basics you need to know no matter where you've set up shop.

Because worker’s compensation rules and regulations are governed by the states, laws that apply to Ohio businesses don’t apply to employers in California. But most states share a similar framework for the worker’s compensation process. Here are some of the most frequently asked questions when it comes to small business worker’s compensation coverage.

I am self-employed with no employees. Do I need to carry worker’s compensation insurance on myself?

In most states, self-employed persons have the option of purchasing coverage for themselves, but it’s usually not required by law.

Can I self-insure my business?

Many states allow businesses to be self-insured: you provide your own worker’s compensation coverage rather than purchasing outside insurance. Keep in mind your state’s requirements. In California, for example, a business must have a minimum net worth of $5 million, net income of $500,000 per year and a security deposit to the state to be self-insured. In Louisiana, you can join a group of self-insured businesses or associations.

I use contractors or volunteers. Do I still need worker’s compensation insurance for them?

Unpaid volunteers for private employers and non-profits are typically not covered, or required to be, by worker’s compensation insurance. States also commonly exclude independent contractors and employees of private homes. However, part-time, temporary and seasonal employees are almost always covered. Check your state’s workers' compensation board for specific requirements.

What type of penalty could I face if I don’t carry worker’s compensation insurance?

Failure to comply is often costly. In Utah, the penalty is $1,000 or three times the amount of the premium you would have paid during the entire period of non-compliance, whichever is greater. In New Mexico, your business could be forced to close.

Can I require employees to pay a portion of their worker’s compensation insurance?

No. Worker’s compensation is viewed as a cost of doing business. Likewise, business owners cannot ask employees to purchase their own worker’s compensation insurance.

I subcontract work to other firms. Is it my responsibility to check if they’re complying with the law?

Yes. In most states, including South Carolina and New York, the principal contractor is liable for its subcontractor’s employees if the subcontractor does not have valid worker’s compensation insurance.

What if an injured employee already had a pre-existing condition?

Pre-existing conditions rarely exclude employees from receiving worker’s compensation benefits. In fact, employees can recover benefits if the pre-existing condition was aggravated or worsened by the employee’s work activities.

Did you know NFIB members get great rates on top-rated workers' compensation policies? Learn how you can take control of your workers' comp costs now.

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