If you own a company, in any state in the U.S., you are required to pay for State Worker’s Compensation coverage. This is required, so that you are covered, in the event that an employee becomes ill, or is injured, due to a workplace incident. However, there are some cases where you can apply for a Worker’s Compensation Exemption form. This can become confusing, so let’s take you through a couple of examples of how Worker’s Compensation...well...WORKS!
Here is the scenario:
Mike is employed as a Carpenter with a Corporation, and one day while hammering together 2 boards, he accidentally misses the board and slams his hand.
Due to his injury, Mike was sent to a doctor to seek medical treatment. In this situation, because Mike was working at the time of his injury, Worker’s Compensation coverage would pay out for his injuries, sustained.
Simple enough, right?
What if you are operating as an Independent Contractor, and have no employees? Would you need a Worker's Compensation policy, just as an individual?
The answer is no. As an individual, with no employees, you aren't required to carry Work Comp. on yourself. However, you CAN. And the benefit to that, would be if you do get hurt and cannot work, your Work Comp. policy would not only cover your medical expenses, but also , your lost wages.
As an individual, if you choose to forego a Work Comp. policy, you can file for a Work Comp Exemption form.
The Work Comp Exemption form is used by some states to allow those who are self- employed, to be exempt from Work Comp coverage. This form excludes the named individual from the State's Work Comp laws, which differ from State to State.
SO. Let’s go back to our Mike scenario, and switch it up a bit.
Say that Mike is now an Independent Contractor and has filed the Work Comp Exemption Form, with the State. Mike hammers his hand again, but this time, there is no Work Comp. coverage to pay for his injuries. Mike will have to rely on his Health coverage or pay his medical bills out of pocket. Although he has no coverage to pay for his injuries, the Work Comp Exemption still holds him compliant with the State. Work Comp Exemption forms can be completed and sent into the State for approval. If not approved by the State, a Work Comp policy would then be required to be purchased.
We hope that this gives you an easy reference and a greater understanding to when you need a Worker’s Comp. policy vs. when to file for a Worker’s Comp. exemption form, and how each would apply. Download this informational flier to break it down, even more!
Author: Ashley Rayn- IMG Commercial Lines Account Manager