Workers’ Compensation Insurance

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What you need to know about Workers' Comp Insurance

Workers’ compensation insurance or workers’ comp, is a type of insurance that pays for medical expenses and lost wages due to injuries sustained on the job. These types of injuries are not covered by General Liability or other policies, so a business should carry workers comp to protect themselves and their employees. An injured employee is entitled to benefits regardless of whether the employer was negligent or contributed to their injury in any way. 

Most likely yes. Workers Compensation is required by law in nearly every state. However, each state has a different threshold for when coverage is required. More importantly, all businesses with any labor expenses SHOULD carry Workers Comp coverage. In most cases, a business is responsible to pay workers compensation benefits- regardless of whether they carry a workers compensation policy. That means, if your worker is injured, your business could be on the hook to pay their medical expenses. 

The North Carolina Workers Compensation Act requires “all businesses that employ three or more employees, including those operating as corporations, sole proprietorships, limited liability companies, and partnerships, obtain workers’ compensation insurance or qualify as self-insured employers for purposes of paying workers’ compensation benefits to their employees”. If you are a corporation, the owners/officers DO count as employees, although they can choose to be excluded from coverage.  

Workers Compensation is an Exclusive Remedy, which is a legal term that means it is the only possible way for an injured worker to receive compensation. They cannot bring a lawsuit against the entity who is paying them that falls outside of workers compensation law. Since this is the only way that injured workers can be compensated, the laws in virtually every state are designed to protect those workers. While some of the rules and requirements may not seem fair to the employer, the system does not have any other way of helping laborers who get hurt on the job. As with many well-intentioned public policies, the practical application doesn’t affect everyone equally. Our job is to help you protect your business from the workers comp risks you didn’t even know you had.

Whether you use traditional employees, temporary or casual labor, or subcontractors, you need to be aware of your exposures and how a workers comp claim can affect your business. If you pay laborers of any kind- it is a safe bet to assume that you are legally responsible for their safety, regardless of any written agreement you may have. Many people don’t realize there is often a “statutory employee” relationship established- even if the person isn’t an actual employee. Workers Compensation is the policy that protects you from financial losses as the result of injuries to workers that meet any of these descriptions. Even if you aren’t responsible, and a subcontractor has their own policy, attorneys may still attempt to include you in an injury lawsuit, and your workers compensation policy can defend you against frivolous claims so it does not cost you money out of pocket.

The North Carolina Industrial Commission specifically states that referring to laborers as subcontractors and issuing 1099s for tax purposes does not prevent them from being counted as an employee for workers compensation purposes, so anyone who hires labor in North Carolina would be wise to carry workers comp for their own protection- even if not required by law. While every state is a little different, this would certainly be a good rule of thumb for anyone who is concerned about protecting their business from injury claims by either employees or subcontractors.

Small businesses or individuals with little or no payroll need easy, affordable solutions to meet minimum workers comp requirements and get their certificates of insurance quickly. Our online options provide that. You can get very low rates on workers comp from multiple carriers in seconds, and you can apply online. Workers Comp payment plans are available with low down payments- and in some cases, the policies can be set up on a “pay as you go” basis depending on your weekly or bi-weekly payroll levels. Workers Comp Certificates can be issued the same day for most small businesses so get your quote now!

A Workers Comp Audit is used by an insurance company to confirm the level of payroll a business has or had during their coverage period. While they can be frustrating, they are a necessary component of a workers comp policy. 

Typically, you simply provide some documentation pertaining to your payroll during the policy period and answer a few questions, and that’s it. 

A “Ghost Policy” is a term used for a Workers Compensation policy with zero employees, zero payroll and an excluded owner.

A common example of how a Ghost Policy is used would be in the construction industry. When a General Contractor (GC) is building a house, they would likely use dozens of subcontractors throughout the build. Without their own policy, each of these subcontractors could technically file a claim on the GC’s workers comp policy. To avoid this, the GC will require them to have their own policy. If they don’t, they would automatically be included in the GC’s payroll audit (even if they didn’t want to be), which could cost the GC tens of thousands of dollars per year. In reality, each of these subcontractors is really its own little business, many of which consist of just one person. This is why the general contractor would require each subcontractor to carry their own workers compensation policy, which now means they don’t have to be included on the general contractor’s workers comp policy.

Technically, no one is covered, but Ghost Policies still serve a purpose. 

In most states, if an employer has a workers compensation policy, all workers (1099 subcontractors or W2 employees) are automatically covered on the policy unless they have their own policy. To avoid having to cover and pay for all of those workers, the employer may require the worker to carry their own policy. If that worker doesn’t have any workers of their own (i.e. people that they pay directly – employees, helpers, subcontractors), they would get a workers compensation policy that shows they have zero payroll and zero employees. Then they would exclude themselves to lower the cost, which now makes it a Ghost Policy.

Larger businesses often require more nuanced analysis and risk management, beyond just a simple workers compensation rate comparison. Our team has decades of experience that can be leveraged to find the lowest premium AND the most value added services to control claims and keep rates stable. In most cases, you can still get an online indication that will include your experience mod, but proactive safety programs can go a long way toward getting additional discounts that are not factored into rating algorithms. Our agents can present your business in the most attractive way to underwriters. A good narrative about your experience, safety practices, and claims record plays a big part in securing lower workers comp rates for your company.

The information provided here is for informational purposes only. Insurance coverage and requirements can vary from state to state, so be sure to check your local laws and regulations or speak to a local insurance agent in your state. 

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