Although all employers are required by law to have Workers’ Compensation Insurance (aka “Workers’ Comp”) policies, it is frequently overlooked, and employers are often under-insured.
Workers’ Comp is rated based on the classification of the type of business and the payroll. Premiums change according to the business’ payroll, not the number of workers employed.
You do not have to notify your insurance company as you hire new workers, or if your payroll increases. The insurance company performs audits independently to find out the number of employees a business has, as well as its payroll.
A standard Homeowners’ policy has minimal coverage for “transient workers,” limited to the maximum amount of coverage on the home. This covers two domestic servants or household employees working part-time (less than 40 hours per week).
If you have more than two workers, or if you have any full-time employees, such as a live-in nanny or full-time housekeeper, you will have to contact your insurance company to obtain additional coverage. Even if you have an umbrella policy, it will not cover this additional employee exposure (i.e., having a full-time employee and/or more than two employees in your home).
A failure to provide workers’ comp can result in penalties of up to $5,000 for the first ten days and $5,000 for each ten-day period thereafter.
Do not wait to find out that you are underinsured—call your insurance agency and make certain that you have adequate coverage.