As a contractor running your own business, figuring out what types of insurance you need for the business is one of the most important ways you can protect your hard work. And this important task, while crucial for minimizing risk, can be confusing and frustrating. This is especially true with Workers Compensation insurance, as not every state requires Workers Compensation, and not every state enforces the requirement for every business owner.
Sound like things are getting more complicated by the second? Fear not. We’ll break it down here and explain just who needs Workers Comp in the construction industry, and who can most likely skip it. If you’re in a hurry you can skip right to point and get our Workers Comp cheat sheet to give you the answer.
If you’re the type who wants all the gritty details, read on…
What is Workers Compensation?
Workers Compensation is a type of insurance policy that provides benefits to an employee or their dependents for work related injuries, disability or disease sustained by that employee. In plain english: if someone who works for you gets hurt on the job, or because of the job you hired them to do, Workers Comp covers the costs associated with that, so your business doesn’t foot the bill.
A Workers Comp policy is purchased and maintained by the employer for the benefit of the employee. Workers Compensation laws were established in the early 1900’s to address the conflicts between employees and employers along the issues of workplace injury and illness. Before these types of laws were adopted, employees used to have to sue their employers to recover any lost wages due to absence or compensation toward medical bills. Thankfully that’s no longer the case.
What does Workers Comp Cover?
Typically, Workers Compensation insurance will provide payment for medical bills related to diagnosis and treatment of a workplace injury or illness. Coverage may also extend to rehabilitation and recovery treatments. It also provides disability payments to the injured employee while they are unable to work. Lastly, Workers Comp can be used to cover injury or illness that is the result of multiple years of job operations or workplace conditions.
Are all Job Related Injuries Covered?
Most job related injuries in the construction industry will be covered by Workers Comp, but not all. Injuries stemming from intoxication, violation of company policy, self-infliction, or injuries sustained while not at work are almost always excluded from coverage under the policy. Almost all injuries that might not be eligible for coverage can be mitigated by creating and adhering to a workplace safety program and code of conduct.
So now that we know the basics of a Workers Compensation policy, does everyone need to carry it?
Who is Required to Carry Workers Comp Coverage?
Compensation laws have come along way since their early days, with nearly every state requiring employers to carry coverage if they have employees. We use the term “nearly” since insurance is governed by the state, rather than the federal government. Therefore, state laws encompassing Workers Comp vary by state.
It gets even a little more complicated in certain states, as requirements for Workers Comp are different depending on the industry in which you’re operating. Texas, for example, only requires private employers to carry a Workers Comp policy when employees will be working on public projects, whereas California requires all roofing contractors to carry Workers Compensation, regardless of whether or not they have an employee.
Though each state has their own guidelines, here's a basic series of questions you can ask yourself to see if you may need a workers compensation policy:
You’ll want to review your state’s requirements, but a basic rule of thumb is if you have an employee, you should probably carry a comp policy. Still confused, or have a unique situation you’d like to discuss? Give us a call or send us an email and we’ll be happy to help you work it out.