When is a Company Exempt from Workers’ Comp Required to Get Coverage?
Being exempt from a state’s Workers’ Compensation system means a company is not required to have insurance by law. That said, there are some reasons why a company might need to get insurance, despite being exempt.
Companies that are normally exempt from needing Workers’ Compensation might have to purchase coverage when doing business in another state with different insurance requirements or when a contract requires a company to get insurance. Rarely are entire companies exempt from needing Workers’ Compensation. In most cases, only a few individuals within a company are exempt, meaning the rest of a company’s employees must be covered. Exempt companies or individuals can elect to get coverage by informing the necessary agency in their state and sourcing quotes from insurance carriers. Exemptions are not permanent and may need to be renewed periodically. Even exempt companies can benefit from getting Workers’ Compensation to protect themselves from civil action in case of a workplace accident.
To learn more about getting coverage for your company from NPN Brokers, call our Florida Workers’ Compensation insurance brokers today at (866) 340-9120.
When Do Exempt Companies Need to Get Workers’ Comp Coverage?
Depending on the state your business operates in, getting Workers’ Compensation might not be mandated. Despite being normally exempt from needing coverage, your company could be required to get insurance in certain circumstances. For example, when doing business in another state or when required to by a contract, a company that is otherwise exempt might need to get Workers’ Compensation.
When Doing Business in Another State
Just because your business is primarily located in one state does not mean it will not have a Workers’ Compensation liability in another state. For example, suppose your company is primarily located in New Jersey but has offices or employees that work outside of Florida. In that case, even if your company is exempt from needing Workers’ Compensation in New Jersey, it might be required to get a policy in Florida, provided it meets the state’s requirements for needing workplace liability insurance. States with very strict Workers’ Compensation rules might mandate that an out-of-state company with even just one in-state worker get insurance in the state the employee operates in. Recently, this has impacted employers who hire remote workers that live in other states. These rules also largely impact trucking companies whose drivers transport goods throughout various states nationwide. Pay-as-you-go Workers’ Compensation might be ideal for companies in these types of situations.
Getting out-of-state coverage can be challenging, especially when it comes to assessing premiums and knowing your company’s new coverage requirements. To aid in this endeavor, our Orlando Workers’ Compensation insurance brokers can assist you in locating an affordable policy to ensure your business adheres to coverage requirements in all states it might operate in, even if it is exempt in its primary state of operations.
When a Contract Requires Insurance
When taking on a specific job with a client, the client might request that your company secures a Workers’ Compensation policy before beginning a project. This could occur even if your company is not required to get Workers’ Compensation in its state of operations because of available insurance exemptions. Needing Workers’ Compensation might be written into a contract for various reasons. A major one is so that a client can avoid any possible liability for injuries that might be sustained by a worker when completing a project. This is common in Georgia, for example, where clients can require that a company gets Workers’ Compensation if it is written into a contract. Because of this, your company might find itself in a position of needing Workers’ Compensation quickly in order to take on a specific job.
In other situations, the existence of a contract between the hiring party and a contractor, or, in some cases, a subcontractor, means that getting Workers’ Compensation is necessary. The rules regarding this particular relationship and situation vary from state to state. Many states exclude independent contractors from Workers’ Compensation, meaning if a company hires a contractor, they will not be considered a regular employee and will not be eligible for Workers’ Compensation. So, if a company is exempt from needing insurance and hires a contractor, it might still be exempt from needing coverage. This largely depends on industry classifications and state requirements, so it is important to ask our brokers for clarification regarding your specific situation.
Do Workers’ Comp Exemptions Mean a Company Does Not Need Coverage?
Workers’ Compensation exemptions exist for a variety of reasons. Even if your company is eligible for certain Workers’ Compensation exemptions, that does not mean it will not be required to have a workplace liability insurance policy in place.
Only in some cases do Workers’ Compensation exemptions apply to an entire company. Usually, they pertain to individuals within a company, such as members of an LLC or officers of a corporation. Each state has different rules regarding Workers’ Compensation exemptions for such individuals.
Generally, entire companies are only exempt from needing Workers’ Compensation based on the size of their workforces. The threshold for needing Workers’ Compensation based on the number of workers employed by a company is relatively low from state to state, meaning it is rare for companies not to need Workers’ Compensation at all.
So, even if certain individuals within your company are exempt from needing to be covered by Workers’ Compensation, you will likely need to have a policy in place for non-exempt employees. Using the Workers’ Compensation exemptions available to your company could lower the cost of its insurance premiums or put your company under the payroll threshold for insurance, eliminating its insurance liability. Whether or not this applies to your company will depend on your state’s Workers’ Compensation exemption rules.
Will Your Company Always Be Exempt from Needing Workers’ Comp Coverage?
Over time, the landscape of your company might change, altering its eligibility for Workers’ Compensation exemptions. So, even if your company is exempt from needing Workers’ Compensation today, it might not be exempt tomorrow.
One of the biggest reasons why a company’s Workers’ Compensation exemption status might change is a growing workforce. States generally mandate Workers’ Compensation based on the number of workers employed by a company. So, if you begin expanding your company’s size and hire more workers, you might need to get Workers’ Compensation despite being previously exempt.
Companies might also change directions, becoming part of a different industry. Some states, like Florida, mandate Workers’ Compensation coverage based on industry as well as the size of a company’s workforce. Slight changes in employee responsibilities could alter your company’s industry classification, making it need Workers’ Compensation to comply with state mandates.
Often, states require individuals and companies to reaffirm their exemptions, especially if the exemptions are elective. You might need to do this on an annual basis or every few years. If you fail to reapply for a Workers’ Compensation exemption when necessary, you might be penalized for failing to have coverage in your state. Penalties often come in the form of fines, which can become very expensive.
States might also change their rules regarding Workers’ Compensation exemptions. Should this happen, you might need to find Workers’ Compensation quickly to comply with the new insurance rules. All that is to say, Workers’ Compensation exemptions are not permanent.
How Can Exempt Companies Get Workers’ Comp Coverage?
The process of getting Workers’ Compensation for exempt companies varies from state to state. Generally, companies seeking Workers’ Compensation have to inform the agency that governs workplace liability insurance in their state about their desire to get insurance despite being exempt. Then, they must contact insurance companies to get quotes and policies.
File the Proper Paperwork
Suppose your company is automatically exempt from the Workers’ Compensation system in its state or has previously filed for an exemption for a specific individual within the company, and you wish to alter that arrangement. In that case, you might have to file some paperwork. For example, in Georgia, exempt individuals or companies must submit Form WC-10 to the State Board of Workers’ Compensation if they wish to change their exemption statuses. Generally speaking, companies previously exempt from needing Workers’ Compensation should inform the equivalent agency in their state about their desire to get insurance. Once you have secured a policy, you can send such information to the same agency so that it can update its records about coverage for your business.
Get Quotes from Insurance Companies
If your company did not previously need Workers’ Compensation because it was exempt, and its situation has since changed, you might be new to the process of getting coverage quotes. This can be especially frustrating for companies seeking Workers’ Compensation in other states. To start this process, our Tampa Workers’ Compensation insurance brokers will begin by requesting information about your company. This includes information about your company’s payroll, your company’s age, and your company’s past experiences with workplace accidents. If a contract requires you to get Workers’ Compensation, you may need to get it for all of your employees. This could result in a more expensive Workers’ Compensation policy.
Our brokers will assess your industry compared to the rating system used in your state to confirm that the quotes you receive from insurance carriers are appropriate. The rating system might vary depending on the state your company primarily operates in and the state you need Workers’ Compensation in. The cost of insurance typically depends on a company’s industry and size. In all likelihood, your company will be relatively small since it previously did not need Workers’ Compensation. This could work in your favor when getting Workers’ Compensation coverage quotes. When assessing quotes, it is important to understand your company’s risk factors so that you do not end up paying more for Workers’ Compensation than what is necessary for your specific situation.
Why Should Exempt Companies Have Workers’ Comp Coverage?
Even if your company does not need to have a Workers’ Compensation policy, getting one can still be a good idea. Having a workplace liability insurance plan in place can protect your business from liability in the event of an on-the-job accident.
Just because your business might not be required to have Workers’ Compensation does not mean it is immune from litigation if an employee is injured on the job. The only sure way to protect your company from civil action in these circumstances is by getting Workers’ Compensation. Across all states, having workplace liability insurance means that a company cannot be sued if an employee is injured at work. While your company might pay insurance premiums to its provider, the cost is generally much lower than the likely expense of a lawsuit.
Having Workers’ Compensation coverage can also make employees feel more comfortable working for your business. In providing a safety net for employers, Workers’ Compensation insurance does the same for employees. Similarly, clients might be more at ease working with a company that is protected by Workers’ Compensation, even if the law does not require coverage for that specific business. If Workers’ Compensation rules change in your state and you have a policy in place, your company will not be at risk of incurring possible fines for non-compliance. For peace of mind in all areas, companies should get Workers’ Compensation, whether or not they are mandated to have insurance.
Call NPN Brokers to Get Workers’ Comp Coverage for Your Company
Start protecting your business today by calling the Jacksonville Workers’ Compensation insurance brokers at NPN Brokers at (866) 340-9120.
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