Important Facts about Workers Compensation Insurance

Who needs Workers Compensation Coverage?

California law requires employers to have Workers’ Compensation Insurance. Even out-of-state employers may need Workers’ Compensation Insurance coverage if an employee is regularly employed in California or a contract of employment is entered into here. All California employers must provide Workers’ Compensation Insurance benefits to their employees under California Labor Code Section 3700. There are five basic types of Workers’ Compensation Insurance benefits – medical care, temporary disability benefits, permanent disability benefits, vocational rehabilitation services, and death benefits. In California, all employers, whether large or small, are required to have coverage for their employees with Workers’ Compensation Insurance. An employee does not have to be full-time, or employed by only one employer for any number of months or days. In addition, there is no need for a written employment contract and employees can include legal and illegal aliens, minors and prisoners. Under certain circumstances; i.e., a home owner, you may be required to have workers’ compensation if you hire someone to perform gardening, maintenance, house cleaning, etc.

What does a Workers Compensation Policy Cover?

Workers’ Compensation coverage is offered under Part One of a Workers’ Compensation Insurance policy. In Part one, the insurance company agrees to promptly pay all benefits and compensation due to an injured worker. Employers Liability insurance can provide important coverage in addition to Workers’ Compensation Insurance. Employers Liability is offered under Part Two of a Workers’ Compensation and Employers Liability Insurance policy. Employers Liability Part Two protects the employer against instances where an employee’s injury or disease is not considered work related.

Who’s exempt from Workers Compensation Insurance?

Only corporate officers or limited liability company (LLC) owners in the construction industry with at least a 10 percent stock ownership in the corporation or LLC can elect to exempt themselves from Workers’ Compensation coverage. No more than three per corporation or LLC are allowed to be exempt. This new law will curb the tide of costly and dangerous practices by those construction employers looking to make a fast buck, while exposing employees and consumers to financial and physical harm.

Can a sole proprietor or individual exempt themselves from Workers Compensation Insurance?

Sole Proprietors and partners are not required to cover themselves, but can elect to be covered. Corporate officers are covered but those who own at least 10% of the corporation’s stock may elect to be exempted from coverage. If you work for yourself or own a business, you may not be required to carry Workers’ Compensation Insurance coverage. Sole proprietors, partners, and officers of closely held corporations are generally not considered employees unless specifically listed under a policy. If, the employer hires employees, the employees must be covered even if the owner is not. Sole proprietors, partners, and officers of closely held corporations are generally not considered employees unless specifically listed under the business Workers’ Compensation Insurance policy.

What do you consider a Sub-Contractor or Independent Contractor vs. an employee?

Independent contractors and subcontractors are considered employees of their clients unless they meet certain very specific criteria for independence and both parties have their own Work Comp Policies.


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