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Workers Compensation: To Exclude or Not to Exclude?

Workers Comp Exclusions

If you’re like most small business owners, you’re ready and willing to cut your insurance costs whenever you are able.  A popular option for these owners is to exclude themselves from Workers Compensation coverage.  It doesn’t just reduce your payroll, it usually cuts out the largest section of it, as employers typically earn more than their staff. However, to paraphrase an old saying, this could be a case of being “penny wise and pound foolish.”

A quick internet search revealed that according to the Bureau of Labor Statistics, the rate of Illness and Injury in 2019 was 2.8 occurrences per 100 workers – meaning that roughly three out of every hundred people you know will be injured at work in a given year.  Former Consumer Advocate Ralph Nader once wrote that “There’s no better policy in a society then pursuing health and safety of its people,” and while that’s true of actual workplace safety, it also holds true for insurance advice as well.

As it turns out, most health insurance policies are written to specifically exclude workplace and work-related injuries. Sometimes coverage might initially apply if you’re in a business that blurs the lines between your work and home lives; for example, if you’re a consultant working from home who is injured while visiting a client – initially your policy might respond, but once your health insurance company finds out that your injury was somehow work-related you could find a subrogation form in your mailbox.  Subrogation is the process of an insurance company demanding reimbursement from a responsible party after a loss. If you or your business were responsible for this loss AND you’ve excluded yourself from workers compensation coverage, that cost could be coming out of your bottom line.  Before you make any decisions, read your health insurance policy and just to be safe, discuss it with your agent as well.

Ultimately, the best advice I can give you is a mantra I’ve repeated over and over to clients for the last fifteen years: “Don’t Cheat Yourself!”  You know your business and you know your level of involvement, if you’re actively taking part in day-to-day operations, then it’s probably a very bad idea to exclude yourself, as you’ll likely find yourself in a pickle if you have an accident at work.  

However, if your role has changed to more of a managerial one, excluding yourself from your workers compensation policy is possibly a safer decision.  You might also be able to include yourself under a different code like a managerial or clerical worker, just remember, the second you put down that ledger and pick up that trowel, in the eyes of the state you’ve gone from a manager to a bricklayer, and your rate changes accordingly. Remember that honesty is once again the best policy: if you voluntarily inform your carriers of what you’re doing, they’ll be much happier than if they find out as a result of an injury. As Voltaire once said, “The danger which is least expected soonest comes to us.”

Allan Block Insurance, Professional Service with the Personal Touch

We are located in Tarrytown, NY, in the heart of Westchester County, a key business district just north of New York City. We write auto, home, renters, condo, co-op, personal, business, life and group insurance for clients locally and in NYC, CT, NJ, PA, MA and many other states. For more information or answers to your insurance questions, please contact us.

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