The Basics Of Getting Workers Compensation Insurance

Posted on: 16 December 2019

Workers comp insurance is a fundamental part of the relationship between many businesses and their workers. It's a good idea, however, to understand the basics of the system. Let's look at four things you should know about workers compensation insurance.

Are You Required to Carry Comp?

The answer varies from state to state. For example, Pennsylvania has a strict rule that any business that has even one employee must carry workers compensation insurance. That applies even if the one employee if a child or a spouse, and it applies no matter how many hours per work the person puts in. Conversely, Alabama doesn't require comp coverage until a company employs at least four people.

What About 1099 Contractors?

Some companies have tried to assert they employee people as independent contractors who are issued the 1099 tax form means they don't have to carry coverage for workers comp. This is a formula for disaster because of the way compensation is awarded. Doing things this way risks being on the hook after you haven't paid into the system, putting you in a worse position than if you had just paid up in the first place.

For the sake of granting comp claims, a worker is considered an employee if they don't work at will. If someone was assigned to come into a job site each day at a specific time, for example, they may be considered an employee eligible for workers comp. Unless the person has the right to consider options from a pool and refuse jobs they don't like, they're probably a comp-eligible employee.

What Happens If You Don't Purchase Insurance?

Once again, this varies by state. Under some circumstances, criminal charges can be filed. That includes the possibility of jail time. There will be fines applied, and there's also the risk that you might be the subject of a lawsuit. Work at any job sites you are currently running will be shut down until you get on the right side of the law, too. If you have any doubts about whether you should carry coverage, it's wise to contact a business attorney to learn what the rules in your state are.

How Do You Buy Insurance From?

This is another issue that varies by state. In some states, there is a government-run general fund that allows employers to buy in. Other states have private insurance companies that sell compensation insurance. Still others offer each one as an option you can choose from.