One of the most common questions asked by businesses who are looking into the various insurance coverages, is whether they will need workers’ comp coverage.
There are some instances where the coverage will not be necessary, but it is important to double-check to see what rules apply to you.
Below, we will take a closer look at who is exempt from the workers’ comp insurance requirement.
Typically, any employer who has employees will be liable in the event of an injury to one of the employees. The workers’ comp policy is meant to protect the employer from any sort of expenses that are connected to the employee’s injury.
All employers are required to carry workers’ compensation insurance, except in Texas. This is the only state in the country where it is not a requirement.
However, there are certain exemptions to this requirement. One is the amount of employees a business has. If it has less than X number of employees, it doesn't have to have workers’ comp coverage. This number varies by state.
In Florida, for example, if an employer has three or fewer employees, they are not required to have the Workmans’ Comp insurance. The number for the numerical exemption varies between states.
Let’s take a closer look at the requirements and exemptions in Florida, as it can be a little more complicated than it initially sounds.
If you are operating a business, other than in the construction industry, and you have four or more employees, whether they are full or part-time, you must have workers’ compensation coverage. Keep in mind that an exempted corporate officer doesn’t count as an employee in this case.
For those who are working in the construction field and who have one or more employees, including yourself, workers’ compensation coverage is always required.
Again, the only exceptions to this would be for exempted corporate officers or members of a limited liability company. In this case, they do not count as employees.
The state government, as well as local governments throughout the state, are required to have workers’ compensation insurance.
Farmers in the state of Florida who have more than five regular employees and/or 12 or more other workers for seasonal agricultural labor for at least 30 days are also required to have workers’ compensation coverage.
While these rules seem complex, they are fairly easy to understand. If you have questions, you can talk with your insurer to see whether the coverage is required.
In many states, there is just a simple numerical threshold that will need to be met to be considered exempt.
Something essential to understand is that even if you qualify for an exemption, it does not mean that you are absolved from liability. If the employee is injured, you are still obligated to take care of their injuries.
Therefore, even if you might fall into the exempt category, it may still be a good idea to opt for coverage. It can help you cover the bills in the event of an accident or injury.
This was touched on briefly above, but it’s important to go into a little more detail here, as it can be confusing.
What about the owners and officers of a business? Is there a workers’ comp exemption for sole proprietorship?
Typically, the owner of the business will have a choice of whether they want to be included in the policy or not. They don’t usually have to be if they don’t want to be, but it can still be a good idea to have this coverage.
Still, the goal of the Workers’ Comp coverage is to protect the employees rather than the owner, so it’s not necessary.
Of course, you still have to remember that different types of businesses and different states will have their own rules. In some states, for example, a member of an LLC might automatically be included in the policy unless they choose to be excluded.
On the other hand, an officer of a corporation might be automatically excluded from the policy unless they choose to be included. In other states, the only option a partner might have to exclude themselves would be if they have at least 10% ownership in the company.
The processes for including and excluding officers will vary from one state to the next.
In some cases, you may need to fill out workers’ compensation exemption forms for exclusion or inclusion with the state.
In other states, you might only have to express your desire and fill out forms for the insurance company. Always take the time to speak with the professionals at the insurance company to know what you need to do to comply with the laws in your state.
Additionally, certain industries, such as construction, may have the exemption expire after just a couple of years.
This means that you, as the owner, would have to check to make sure that you are still exempt, if that is your wish. If you don’t, you will end up being included in the policy, which is going to increase the cost - which you probably don’t want.
Should you add yourself to the workers’ compensation policy or not? Ultimately, the decision is yours, but you will want to weigh the pros and cons.
Most business owners choose to exempt themselves when possible, because it can help them to save money. You have health insurance that should be capable of covering any injuries that you might get.
However, most health insurance policies will have their limits. If you are in a field where there is a real risk of injury, even when you try to mitigate the risks, it may be worth it to add yourself to the coverage.
Talk with the insurance company to see how much extra it will cost if you are added to the coverage. You can then make the decision that’s right for you.
At Kickstand Insurance, we review all quotes to make sure you are getting a policy with the right coverage for you and your employees.
We’ll tell you which forms need to be completed for your exemption and help you fill them out. We can assist with workers’ compensation exemption letters, and we’ll also help you with workers’ comp exemption renewal needs.
Get started by filling out an instant insurance quote so we have your information handy and we’ll be happy to help you navigate your exemptions.