Every Contractor With a Family Should Buy Workers' Compensation Insurance
Posted by Dan Phelan on Tue, Mar 01, 2011 @ 12:45 PM
In Connecticut, here are the types of employers and employees that aren't legally required to carry workers' comp:
- Domestic employees working less than 26 hours weekly – or officers of fraternal organizations paid less than $100 per year.
- A corporate officer is automatically included and must carry WC unless they elect to exclude themselves.
- Sole Proprietors and partners are automatically excluded , but may elect to include themselves.
- Single Member LLC are automatically excluded, but may elect to include themselves.
- Multi Member LLC members are like Corporate officers – automatically included but can exclude.
A lot of the people who are legally able to exclude themselves from carrying work comp, do so because of the perceived cost savings and/or they have health insurance. The one angle that is rarely questioned by employers and insurance brokers alike are the additional benefits that workers comp offers that standard health insurance doesn't. Specifically, wage replacement, permanent disability, and survivor benefits.
Consider this scenario: You're the sole proprietor of a local roofing construction company. You take a fall off the roof and break your arm. If you just had your own health insurance, where would your wages be replaced by? Short-term disability? What if it required multiple surgeries to repair? The co-pays alone would probably be more expensive than a workers comp policy would be. Let's take this scenario a macabre step further. Let's say that the same roofing contractor was the sole provider for his wife and 3 young children. And instead of breaking an arm, he broke his neck and was going to be a paraplegic for the rest of his life. Health insurance does not award payment for permanent disability, modifications to homes and vehicles, or wages. How about instead of a broken neck, the roofer died from his injuries. No one ever wants to think about this possibility, and young men (the types who typically are the sole-proprietor of these construction firms) typically aren't carrying large limits of life insurance. Workers' compensation would also award death benefits to his family in this situation. Workers comp policies can be had for a single employee for anywhere from $500-$2500. These numbers are rough estimates and will vary depending on the work you're doing and the state you live in. However, the underlying theme is that the same dollar amounts that a comp policy would have cost, will quickly be eaten up by co-pays and out of pocket medical costs, and will provide no wage benefits, disability benefits, or death benefits to you or your family. This post is only meant to be taken as food for thought. Not every small contractor has an extra two grand kicking around to spend on workers compensation insurance, but every one of them with a career or life ending injury will wish they did.
One final point worth talking about is helpers. Insurance agents and insurance companies aren't stupid. We know a lot of sole proprietors have their buddies and day laborers assist them on jobs and pay them under the table. Even if you aren't paying them on the up and up, workers' compensation will pay for their injuries...or they can sue you. Just something to think about...
More resources on workers' compesation insurance for Connecticut contractors can be found HERE