Don't fall into the trap of assuming that just because you're homebased, you don't need workers' compensation insurance. In most states, if you have three or more full-time employees, you're required to carry workers' comp. And you may want to buy the coverage even if it's not mandated.
What's the point? In most states, if someone's injured on the job, workers' comp insurance covers lost wages (after a typical waiting period of seven days) and pays all medical expenses related to the injury, says Madelyn Flannagan, research and information director for the Independent Insurance Agents of America. In addition, individuals covered by workers' comp can't sue their employers over an on-the-job injury, except in cases of gross negligence.
Don't try to avoid paying for workers' comp by calling your employees independent contractors. If an audit determines they're actually employees as defined by the IRS Code, you'll be responsible for the appropriate premiums. Even if your staffers are relatives, as long as you're paying them a salary and withholding taxes, they count as employees for workers' comp purposes. Also, depending on your particular type of business, it's possible your primary insurance carrier or your customers will demand you carry workers' comp for anyone who works on their job, regardless of whether or not it's required by law.
Workers' comp rates are set by the state and based on the type of work employees do and its related risk factors. Control your costs by making sure your workers are categorized correctly and by following the safety recommendations your insurance company provides.
Jacquelyn Lynn left the corporate world more than 12 years ago and has been writing about business and management issues from her home office in Winter Park, Florida, ever since.