Cover Up

Don't fall into the trap of assuming that just because you're homebased, you don't need workers' compensation insurance
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If you think you don't need workers' compensation insurance because your company is based in your home, you may be headed for a fall.

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 threeor more full-time employees, you're required to carry workers' comp. And youmay 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 ofAmerica. In addition, individuals covered by workers' comp can't sue theiremployers over an on-the-job injury, except in cases of gross negligence.

Don't try to avoid paying for workers' comp by calling your employeesindependent contractors. If an audit determines they're actually employees asdefined 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 andwithholding taxes, they count as employees for workers' comp purposes. Also,depending on your particular type of business, it's possible your primaryinsurance carrier or your customers will demand you carry workers' comp foranyone who works on their job, regardless of whether or not it's required bylaw.

Workers' comp rates are set by the state and based on the type of workemployees do and its related risk factors. Control your costs by making sureyour workers are categorized correctly and by following the safetyrecommendations your insurance company provides.