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General Liability Insurance And Workers´ Compensation Insurance For Trade Contractors, Home Builders And Remodelers With Savings Up To 38%!

Include Or Exclude Owners Under Workers´ Compensation?

Sole proprietors and partners are not covered under their own Workers´ Compensation policy; however, they may sign a special form to elect coverage. If they elect to be covered, the premium charge will be based on the rate for their classification times an assumed payroll of approximately $30,000.

On the other hand, corporate officers are automatically covered under their own policy and the premium is based on the rate for their classification times their actual payroll (subject to a minimum of approximately $13,000 and a maximum of approximately $99,000). However, corporate officers can sign a special form to elect to be excluded from coverage.

Why would a sole proprietor, partner, or corporate officer want to be excluded from coverage under his or her own Workers´ Compensation policy? Quite simply because it can save a lot of money. For example, if a sole proprietor is classified under Residential Carpentry at a rate of 14.5% and the rules state that his assumed payroll is $30,000, the premium cost just to cover the sole proprietor will be approximately $4,350.

Regardless of the savings, it is my opinion that an owner should never be excluded under his own policy unless he can come close to matching the lost benefits by:

1. Being covered under a Health Insurance policy that provides coverage for on-the-job accidents. Don´t assume that all Health policies cover on-the-job accidents! Many don´t (especially if you are covered under your spouse´s work policy. Get it in writing!
2. Purchasing a Disability Income policy to provide reimbursement for lost income that would result from an on-the-job injury where you can´t return to work. Be careful to purchase a high quality policy from a disability insurance professional as many policies offer extremely limited benefits.
3. Purchasing a Life Insurance policy in the amount that is equal to the Workers´ Compensation death benefit.

Many general contractors are now requiring that their insured subs show evidence that the owners are covered under Workers´ Compensation. This requirement is in response to court cases that have allowed excluded owners to receive benefits under the general contractor´s Workers´ Compensation policy.