Before starting a business, one of the things you need to ask yourself is whether you need to have workers compensation insurance and whether you can afford to pay. The simple answer is yes, you need workers compensation benefits if you have employees. The California Workers Compensation Law says that every business with employees must have this type of insurance to help cover injuries that might occur. This is even true if your business is operated by family members. There is nothing that would exclude you from needing insurance to cover them.
It’s not even just for injuries that occur at work. They can get an illness from the job. Regardless of what or how it happens, if someone is incapacitated at your place of business, they will have medical expenses, may need physical therapy, and will most definitely lose time at work, which means they lose out on pay. This is an incredibly difficult time for someone who could end up losing everything if they don’t have workers’ compensation benefits.
On the flipside, if someone is injured at work and you don’t have workers compensation, not only are you not compliant with the law, but you can also be sued by the person who was injured. This happens even among family members. Businesses without workers compensation insurance are often heavily find in business owners can even be thrown in prison. It’s never worth it to operate any business without providing your employees the coverage they need.
Do You Need Workers’ Compensation for Yourself?
Now that you know that you need to offer workers compensation insurance for other employees, you might be wondering if you need it for yourself. In general, the state of California does not require you to get workers comp if you’re a single-member LLC, and a partnership with another company, or a sole proprietorship. Simply put, if you’re in business with yourself and you have no other employees, you do not need Workers Compensation.
The only exception to this rule is if you’re a roofer. Roofers have a very dangerous job and so even if they don’t have any employees working with them, they must get this type of insurance. Despite this, even if you’re on your own, it’s incredibly smart to have workers compensation insurance. You don’t know what’s going to happen, even if you work at home on the computer. Injuries and illnesses can still happen that can throw you out of work.
Workers’ compensation benefits can help you replace income that you’ve lost, help you pay any medical bills, or even help you make better deals with other companies. That might sound strange, but there are certainly going to be clients who will want you to have this type of insurance before they work with you. They want to know that your protected in the event that your injured while working on a job or project with them.
The laws surrounding workers compensation can be somewhat nuanced. If something does happen with another client, can you be sued? Or can you sue them if you’re the one who is injured? These are questions that you need to ask a workers compensation attorney.
What About Independent Contractors? Are they Employees?
Technically, independent contractors are not employees of your business. That’s given in their name “independent.” They work on their own, so they’re expected to provide their own type of insurance for themselves and their own business. The difficult thing here is understanding where that line is drawn. Are they a W-2 employee? Maybe they’re 1099 contractor. Again, the nuances come into play here and you should contact an attorney to understand your responsibilities and rights in the event something does happen.
It was stated previously that clients may want you to have workers compensation in the event that you are injured before they work with you. You can require the same of independent contractors that you hire. They may get injured while working with you, so they should have their own coverage in case that happens. The goal really is to cover all of your bases. Either they have workers compensation for their business, or you have it for your own to cover yourself.
There are other advantages to requiring independent contractors have workers compensation insurance. Your own insurance rates might be higher if the insurance company knows that you bring on independent contractors or other types of workers. But if your clients are ready have insurance for themselves, this might lower your own premiums. If you have 1099 contractors and that I have their own coverage, your insurance company might decide they want to cover them, increasing your rates.
Can You Exclude Anyone from a Workers’ Compensation Policy?
If you have any employees at all, you must include them in a workers compensation policy. This includes everyone. Any other owners, directors, managers, board members, etc.must be included. The only way that any employee gets away with not being covered by workers comp insurance is if they choose not to be covered. If they don’t want to be covered, then they need to sign a waiver and send it to your insurance company within 15 days.
That waiver will protect you in the event an accident or illness happens as a result of their job. They willingly wanted themselves excluded from your insurance policy, so they are. That will remain in place unless they ask at some point in the future to be reinstated on the policy. Then you must again send a written withdrawal of the waiver to your insurance company for them to start covering your employee.
If at some point you decide you no longer want to use the insurance company you’re with, the new company will also require a new written waiver. The previous waiver will not work. At any time that you change companies or even owners, a new waiver must be provided to opt out. If you’re not sure how much workers compensation will cost your company, then you need to call to get a quote.