Workers' compensation insurance
Workers' compensation pays medical costs and a portion of lost wages for employees injured on the job. It also includes employer's liability, which covers lawsuits brought over a workplace injury. Most states require it once a business has employees.
- Medical treatment. Doctor visits, hospital care, surgery and prescriptions for a work-related injury or illness.
- Lost wages. A portion of an employee's wages while they are unable to work, as set by state law.
- Rehabilitation. Physical therapy and services that help an injured employee return to work.
- Death benefits. Benefits to the family of an employee who dies from a work-related injury.
- Employer's liability. Lawsuits against your business related to an employee's workplace injury.
- Injuries to non-employees. Injuries to clients and the public are covered by general liability.
- Uninsured subcontractors. Not excluded outright: if a subcontractor does not carry their own coverage, their payroll can be charged to your policy at audit.
- Certain injuries, depending on the state. Some states limit benefits for injuries caused by intoxication or intentional self-harm.
- Payroll and class codes. Premium is based on your payroll in each job classification, such as carpentry or roofing.
- Annual audit. At the end of the policy term, actual payroll is audited and the premium is adjusted.
- Subcontractor certificates. Collect a certificate of insurance from every subcontractor to avoid being charged for their payroll.
- Experience modification. Once a business has enough history, its claims record adjusts its rate up or down.
- Waiver of subrogation. Often required by general contractors and property owners.
Is workers' compensation required?
Each state sets its own rules. Most states require it once you have employees, and some apply stricter rules to construction. Rules for sole proprietors, partners and LLC members vary by state.
What is a workers' compensation audit?
After the policy year ends, the insurer reviews your actual payroll and any subcontractor costs. If payroll was higher than estimated, you owe additional premium; if lower, you may receive a refund.
Do I need workers' comp if I only use subcontractors?
If your subcontractors carry their own workers' compensation and give you certificates, their payroll is usually not charged to you. Uninsured subcontractors can be counted as your employees at audit.
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