What is Workers Compensation
This is the most valuable policy a business can purchase to protect the employee’s from injury and the employer from lawsuit. Most people think that general liability is the most important, and it is to prevent an external loss, but it does nothing to prevent the employer from a lawsuit involving an employee.
The construction industry is one of the highest risk industries, hence the specific laws for the construction field. If you work on a ladder there is a risk of falling off, if you work with saws and other dangerous equipment the potential for loss or death is great.
Most states follow the same minimum requirements of $100,000 per occurrence, $500,000 aggregate, and $100,000 per occurrence by disease. What do these limits mean? For any one incident (or claim) the maximum payout is $100,000. The maximum payout for any one policy term, regardless of the number or type of claims, is $500,000. Most policy terms are one year. Finally, the max payout for any one incident caused by disease is $100,000. In many cases these limits are not enough and higher limits of $500,000 and $1,000,000 can be purchased.
Why Purchase Workers Compensation
As a construction employer, you are required to carry workers compensation if you have one or more full or part time employees. Additionally, if you are a sole proprietor or partnership, you cannot be exempt and are included as the first employee. This means as a sole proprietor or owner, even with no employees, you are required to carry workers compensation. Unlike many other types of insurance, workers compensation carries a large penalty for not being in compliance.
Whether it is required or not, an injury or claim without it can ruin and/or bankrupt a company. If an employee slips while walking in from the rain and breaks a leg. Sound a bit exaggerated? Unfortunately, I have seen this incident happen. With workers compensation you are protected, and so is your employee. Without it, you are facing a lawsuit and a potentially large payout. In addition, this can have a large impact on the company reputation and make finding help difficult.
Second, if your business is required by state law to carry workers compensation and you don’t the penalties can be horrific. The minimum fine a company is subject to is $1,000 and a stop work order until coverage is placed. The fine can be up to two times the employer would have paid in manual premiums for the preceding two years. Translation, workers compensation premiums for the business are $7,000 (and would have been that for the two years prior), yet the company did not carry any. Fines could then be $28,000!!!!
To Exempt or Not To Exempt
The first thing to consider is your role in the business. Are you actively involved in the operations? If you get hurt, would you still be able to work or will it affect your income? If the answer to the previous two questions is yes, then exemption is probably not a good fit for you. The next topic we need to visit is how exemption applies and what rate will be used if you are included. Find the information below for your business.
- Sole Proprietor & Partnership: Owners cannot be exempt. The minimum rate is $20,800 and the maximum is $124,800
- LLC’s & Corporations: Officers of the Corporation and Managing Members of the LLC will be included in workers compensation unless an exemption to be excluded is filed with the state. Only three officers or managing members may be exempt and they must have at least 10% ownership. If they choose to be included the minimum annual payroll is $20,800 and the maximum annual payroll is $124,800.
How Do I Purchase Workers Compensation Insurance?
This is the easiest part, call Barbee Jackson Insurance! We have the ability to quote and bind coverage over the phone. If you are not able to call, inquire through our website and we can communicate through email.
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