Workers’ Compensation Insurance

Workers’ compensation insurance is required of all businesses in 49 states (Texas doesn’t mandate coverage) and the District of Columbia. In most states, you’ll need workers' compensation insurance as soon as you hire your first employee. In others, it’s mandated after a certain number of employees. Some states require businesses to purchase workers' compensation insurance from state-run funds, while others allow it to be purchased from private brokers and carriers.

While most businesses are required to retain workers' compensation insurance, limits and premium costs will vary, depending on the state, industry, how many employees you have and, of course, your business’ risk profile and claims history.

Workers’ compensation insurance covers employees for injuries and illnesses sustained in the course and scope of employment, including:

• Medical bills
• Disability payments
• Rehabilitation and recovery costs
• Partial missed wages
• Funeral costs and survivor benefits

Workers’ compensation insurance also covers an employer’s legal defense fees and settlements/judgments, should an injured employee sue for a WC-ineligible workplace injury.

Workers’ compensation insurance does not cover every workplace injury. Coverage may be denied if any of the following apply to the injury:

• Originated outside the workplace
• Self-inflicted
• Resulted from a fight started by the employee
• Related to a felony
• Claimed after an employee is terminated or laid off
• Caused while the employee was under the influence of drugs or alcohol

Determining if your employees are employees or independent contractors is an important distinction. If you classify them the wrong way you could be on the hook for retroactive workers’ compensation insurance (not to mention federal and state taxes) if those individuals are laid off.

So how do you determine if a worker is an employee or an independent contractor? The first step is to explore the business relationship that exists between your organization and the worker. The general rule is the more control your organization has over the worker, the greater chance he or she will be considered to be an employee.

According to the IRS, worker classification can be determined by the following criteria:

Behavioral
Does your company or organization control or have the right to control what the worker does and how the individual does his or her job?

Financial
Are the business aspects of the worker's job controlled by you as the payer? This includes how the worker is paid, whether expenses are reimbursed, who provides tools and supplies, and so on.

Relationship
Do you have a written contract, and do you offer employee-type benefits to the individual? Will your relationship continue? Is the individual's work deemed to be essential to your business?

We’ll consult with you to make sure you’re choosing the right categories.