Exempting yourself from workers' compensation insurance can be done but there are few qualifiers that you need to know. When it comes to anything state mandated, it typically comes with some requirements or regulations. So having a good understanding of what applies to you is key.
An independent insurance agent can help with your workers' compensation exemption and determine if you are a candidate. They have a lot of knowledge and licensing to back it up.
What Is Workers' Compensation Insurance?
Workers' compensation insurance is a policy obtained by an employer to cover the cost of medical expenses and partial wages arising out of a work-related injury or illness. If you have even one employee or are an independent contractor, this policy is crucial to making sure you are protected properly, and that your employees or your own medical and wage needs are met.
What Is a Workers' Compensation Exemption?
A workers' compensation exemption allows you as a business owner to exempt yourself from having to carry a workers' compensation policy on yourself. Some qualifications usually fluctuate from state to state, but the gist is pretty much the same across the board.
Qualifications for workers' compensation exemption:
- Applicant must be an individual who is a sole proprietor and owns 100% of the assets of the business.
- Or the applicant must be an officer of a corporation, a member of a limited liability company with at least a 20% ownership interest, or a partner in a partnership with at least a 20% ownership interest.
- An applicant may qualify for the exemption if the applicant and members of the same family of the applicant hold at least 95% ownership of the business.
Now every state is a bit different, and your independent insurance agent can help sort out your state specifics. Generally speaking, the above chart is a pretty good representation of what qualifications may be regarding exemption.
Does Industry Matter for a Workers' Compensation Exemption?
The industry can matter depending on what state you reside in, and most of the time it's the construction industry that the exemption applies to. A lot of the time, independent contractors (aka subcontractors who get hired on to do a construction-related job) are required to provide workers' compensation insurance on themselves. Most subcontractors don't have a need for workers' compensation insurance for themselves as they typically will use their health insurance if something happens on the jobsite.
However, most employers of said subcontractors want to make sure they are not responsible for a subcontractor injury or illness while they are doing work with them. The transfer of risk can be handled one of two ways: through the subcontractor obtaining a workers' compensation policy on themselves, or the subcontractor exempting themselves from coverage through the state.
Both are viable options and both should be thoroughly discussed with your independent insurance agent to know the pros and cons of how they pertain to your specific situation.
Cost of a Workers' Compensation Exemption
The cost of a workers' compensation exemption varies depending on what state you are in and what your state-specific fees are. Most states will be in the ballpark of $50 to $100 annually. Some of these fees will be dependent on whether or not you have your contractor's license. If you do not have your contractor's license, the fee is more.
Benefits of an Independent Insurance Agent
When you are making the decision to obtain a workers' compensation policy or being exempt from one, the errors can be many if you aren't sure about state regulations and mandates. Don't find out too late. Make sure you have the proper coverage or exemption in place prior to an accident or injury on the jobsite.
Your independent insurance agent is well versed in all things workers' compensation insurance and can help with finding the best solution for you and your business.