The "help" - including nannies, housekeepers, and caretakers - can affect homeowners and auto insurance. Having "help" can also mean having tax implications.
Do you know the insurance and tax implications? If not, Trusted Choice has got you covered.
Homeowners Insurance: Do I Need to Provide my Household Employee with Workers' Compensation Coverage?
Answer: It depends on which state you live in. Here are some of the basics you should know:
- Household employees don't get workers compensation coverage in most states. Some states even prohibit this coverage for these employees. However, you can sometimes provide the coverage voluntarily.
- Know that your homeowners insurance policy generally provides household employees with some medical payments if they were injured on the job. However, it may not cover the full cost, depending on the injury.
- There's something called “Voluntary Compensation and Employers Liability Coverage for Resident Employees Endorsement.” This is additional coverage you can add to your homeowners policy in states that will not allow you to enter the workers' compensation system while at the same time exempting you from the workers' compensation laws.
Because these regulations vary from state to state, it’s best to review your situation with your Trusted Choice agent. They can help you decide the best way to provide coverage for your household employees.
Auto Insurance: Are Household Employees Covered by My Auto Policy?
Your household help will probably use your car at one point or another. The good news is that coverage follows the vehicle.
Coverage for Your Car
This means your auto policy will provide coverage if your employee is responsible for an accident while using your car. There is also coverage if your employee is injured. But if you have workers' compensation for them, that policy will cover the cost of the injuries.
Coverage for an Employee's Car
If your household employee is driving their own vehicle, they will have coverage under their own auto policy. More importantly, so will you if they are responsible for damage or injuries while driving their own car, but performing employment-related duties.
Because your employee's insurance covers you if something goes wrong when they're driving their car, you should get familiar with their policy. If your employee is providing child care, make sure that their auto policy has appropriate amounts of coverage for your children.
If an employee is going to be driving their own car, you might want to require a certain level of coverage as a condition of employment. A Trusted Choice agent can help obtain coverage that works for both you and your employee.
Homeowners Insurance: Are Household Employees Covered by my Homeowners Insurance?
Property
If your employee lives with you, then yes, some property is covered. For example, property you own and let an employee use, like furniture, is covered.
As long as the employee is staying in your home as part of their employment and there's no separate rental agreement, your policy will provide some coverage for any personal items they bring with them. However, the policy will only provide coverage up to a certain amount. So valuable items, such as jewelry or electronics, must be insured separately (by your employee).
Liability
A standard homeowners policy only provides liability coverage for property damage and bodily injury. However, some employees bring suits for things like "nanny cams" - hidden cameras scattered throughout the home. Ask your Trusted Choice agent about adding a “Personal Injury Endorsement” to your homeowners policy to give you additional protection from this type of action.
In some circumstances, it makes sense for live-in employees to purchase their own liability insurance – either a commercial liability policy or business owners policy. Their own personal homeowners or renters insurance won't apply, since they preclude business activities.
Condense Insurance Coverage With an Umbrella Insurance Policy
Finally, having what’s known as a personal umbrella policy can help sooth some of the anxiety of household employees. Like the name implies, umbrella policies offer additional coverage above what is typically in a homeowner’s or auto policy. While personal umbrella policies are not uniform from one insurance company to another, they’re worth looking into.
Families that hire household help should be aware of the implications of having someone working for them in their home. Having a Trusted Choice Independent Agent to help you understand these issues is key.
Taxation: Is the "Help" an Agent or Your Employee?
If you hire a full-time nanny or house keeper, they're either an agent, or your employee. It isn't always easy to tell which is which. But just to be sure, the friendly folks at the IRS developed criteria to help you determine who is and isn’t an employee.
Let's assume your hired help is an employee. This means you're responsible for:
- Verifying their employment eligibility
- Paying employment taxes
These are things you need to know up front. That way, you can comply with the law and avoid paying penalties or fines down the road. Just as you have a Trusted Choice® independent insurance agent to help you with your insurance, you should contact a tax professional with questions about the tax implications of hiring household help.
The Bottom Line
There are countless ways a live-in employee may affect insurance and taxation. Make sure you understand both so your household asset doesn't become a liability!
