Workman's Comp Insurance
We have formed an s corporation as a protection for our personal assets. When we buy a house, the house is deeded in the s corp name. My question is: Do we need Workman's Comp Insurance if we don't have any employees? All workers will be independent contractors. There seems to be some uncertainty even with our insurance company. Our agent said the the independent contractor is not covered but his employees would be. Does anyone have any experience with this, especially if you are in Virginia?
Thank you!
If you are paper contractors (not doing the work) then generally you don't need WC. The contractor doesn't need it on himself (if he is a general) but his employees must e covered by law. SOmoe small contractors get around this by having a temp agency run their employees. you could do the same.
[addsig]
Worker's Comp is for your employees. If you W-2 the contractors/workers, then you must include them in your worker's comp coverage. If you 1099 the contractors/workers, worker's comp is their responsibility since they essentially area business entity themselves. Liability insurance is another story.
Stockpro and bflo are correct...but with that said.....
I am in the same boat you are......S corp, no employees
My attorney, insurance agent, and an NC instructor that teaches continued education courses here in NC all said the same thing when I went to an S corp.........get a ghost policy.
All had the same reason, due to the litigious society in which we live...and sucessful law suits where the GC did not have WC.....and a subscontrators WC expired....etc.....the GC has been found to be responsible.
I keep a tight ship...all of my subs policies are filed here in the office by month and we check the beginning of each month for policies that are about to expire.....even then there have been a few times where a few of my subs policy expired and we had to fork out additional money to my insurance carrier because of the "additonal exposure" that they were liable for.
I carry it to protect my companies assets.
NC[ Edited by NC_Yank on Date 06/28/2004 ]
NC,
Great post! Definitely a smart way to mitigate the risk.
I am guessing that the ghost policy costs very little given no employees. Is this correct. In event, less then the cost of a lawsuit for non-coverage.
John
[addsig]
whats a ghost policy?
Hi! thank you all for your comments.
I was wondering if you can tell us a little more about what you mean by 'ghost policy' too. Is it a regular policy that you dont use since you hire people that have their own policies? It seems expensive for the quotes i have so far. It seems that I would be better off double checking each person I hire to be sure they are covered. This year we will only do 2 houses. Hopefully, next year we will do 3 or 4. My husband will retire from his 8-5 job in a couple years and we will be doing a lot more so I suspect we will need it then... but for now, I think we might be able to get away without getting it if we are careful about who we hire. I think they say it will cost $750 a year if we dont use it. It's worth it if we are in danger of a lawsuit without it but I dont want to get it unnecessarily. Any thoughts?
thanks again!
Hi All,
Workers Comp is based upon amount of "payroll" you have for employees.
Since I am the owner of the company I elected not to be covered.......however I took out a policy which will cover $25,000.00 worth of payroll.
Since I dont have employees this is why it is called a "ghost policy"........but what it does if one of my subs policy expires then my policy will cover it.
Let's say my cabinets maker sends me a bill for 5k.......and his policy expired....I fill out a form every month showing "payroll" or uninsured subs.
I get up with my cabinet maker to have him invoice the labor separately from the material and profit. Even though his bill was 5000.00.......his labor might only have been 600.00..........there fore only 600 will be counted against my 25,000.00 coverage.
At the end of the year......I get audited.....if I dont exceed my 25k limit then I should get some of the money back....minus whatever amount they determine based upon a "liability' expense.
The main thing is to keep accurate and up to date records.
As stated in earlier post....we file our subs policies based upon date of expiration..........this weekend we went over all of my subs polcies that are due to expire in July.....we contact their insurance company to confirm their policy is still in effect.
Any subs policies that expire, I deduct 20% out of their check (labor that is) to cover my expenses.
Insurance is a necessary evil.....be it life, medical, auto...etc........if you are going to have a legit business and dont want to face the exposure.....then its worth it.
NC
[ Edited by NC_Yank on Date 06/29/2004 ]