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 – $1 million 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:
- 100% of all medical expenses
- 66 2/3% of lost wages
- lump sum for disability and disfigurement
- death benefit
Workers’ Compensation is required by most state laws to be carried if your company has paid three 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 currently dated document called a “Certificate Of Insurance.” 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 your subs 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 inexpensive, usually less than 1% of payroll.