Is Workers Compensation Insurance Required?
Workers Compensation Insurance pays a portion of your employee’s salary and medical expenses if he/she is injured on the job while performing duties for the business. It is mandatory by the State of New York and New Jersey and is absolutely necessary for any business. If a business has employees and does not have Workers Compensation Insurance, and an employee is injured, the compensation will be paid by the State and that cost will be passed along to the business with fines.
Any business doing business in the State that has employees is required to have Workers Comp Insurance, regardless if those employees are paid as a W-2 or a 1099. This is important because many employers think that they are not required to have workers compensation insurance for employees that they give a 1099. If you have W-2 employees then coverage has to be in place or a fine will be assessed. If you have 1099 employees then you are still responsible to pay for workers compensation coverage for them unless they have their own workers compensation insurance.
If you have employees and do not have workers comp, you will be fined by your state. The State of New York fines any business at the rate of $2,000 for every 10 days of not having workers comp coverage for employees. The State of New Jersey has a different schedule of fines for employers that do not have workers comp coverage for employees.
How Workers Compensation Rates are Calculated
Workers compensation rates for your business are based on three factors. The first is your classification. Each type of business or operation has a specific rate per $100 in payroll. The higher the risk of the job, the higher the rate.
The second is the total amount of payroll that your company has. Insurance companies run a calculation based on these two factors and determine your yearly rate.
The third is Experience Rating. If a company is operating safely with few or no claims, they can then qualify for discounts. If a company has multiple losses then they will be assessed a penalty and charged a high premium because they are a higher risk client.
All business are required to have workers compensation when employees are involved. Sole Proprietorships and LLC’s afford the owners the opportunity to waive off coverage. Owners must be careful though, because many contracts that require workers compensation also require the owners to be covered by the insurance. Contact LG Insurance Agency to learn more about your businesses Worker’s Compensation needs. If you have 1099 independent contractors and aren’t sure what coverage is necessary, we can review your policy needs and provide a free quote.
All content provided in this blog is for informational purposes only. Topics discussed on this blog relate to insurance products and issues in a general application, and are not an offer of insurance, a guarantee of coverage, or applicable to specific and individual circumstances. Contact LG Insurance Agency for questions and information specific to your insurance needs.
