Question for fellow sole proprietors - workers comp ins
While I've been doing this work for years and years working as an employee, I only recently began my own business, and to this day, I am still learning the "business end" of it. You know, the part you never see working in the field under an employer, the part the administration staff handles.
So I have years of experience repairing equipment and houses, but I'm basically learning as I go along in regards to licensing and insurance.
I'm wondering if I should get workers compensation insurance on myself. I've heard some say this is a good idea, others won't even work with a contractor unless they have it, and yet others don't seem to mind.
I have general liability insurance to cover my work, but I've come to find out that's not the same.
Apparently, if I'm working on a freezer in a restaurant, and fall off the ladder, the restaurant may be liable for my injury. I didn't know this. Personally, I'd never sue a customer unless it was due to their gross negligence.
As I grow my business I'm looking to give my customers peace of mind in knowing that when they contract me to work on a project or repair, that they have practically no worries in my abilities to perform my task safely, and with little to no liability on their part.
FYI: I know that Virginia law DOES NOT require workers compensation insurance for up to three employees. So this isn't a matter of law. It is more a matter of peace of mind for my customers.
However when I have spoken to insurance agents about this in the past, they more/less told me I don't need this coverage.
If I get this, would anyone care to share about how much it cost? I've heard it can be several thousand dollars per year! If that's the case then I don't know what I'd do. Such a premium would sap up most of my profits.
No customers have mentioned it yet, but I'm just trying to think ahead and look into the future.
my non-professional 2 cents...
workman's comp doesn't protect anyone from a lawsuit.
if you suffer a serious injury, workman's comp probably won't pay you what you need.
you have to decide if you want the "benefits" from paying into workman's comp and Social Security.
if you're sweating over a couple of thousand per year, you proabably need to raise your prices
As someone who has been through worker's comp as an employee, I can tell you that having it will protect you from a lawsuit. At least in Texas. If you want to hear more about it you can contact me through a private message because the experience has left a bad taste in my mouth. I would recommend you download the complete WC documents for the State in which you live and read it, over and over. You'll learn how it protects you as an owner or from an employee who got hurt and is looking for compensation from your business
I think my truck and contractors insurance is about $1,400. Can't get collision on my truck. To old. I do spend on tools and equipment, though I am slowing down in my old (er) age. At 1 time I did have work comp, but as I am all by myself so I don't want it anymore. I did have to file something with the state for one of my customers. This was also for his insurance co. Basically it said I was an independent contractor and responsable for myself. Usually do about $1,500 a year for this company. Just because I have been in business since 1972, doesn't mean I know anything. I am still learning. Still learning refrigeration too.
Workmans Comp for a sole proprieter with no employees is really a joke but sometimes you need it to get the job. I pay around 750 a year for my policy which doesn't cover me but anyone I pay to do any work for me. I get audited every year & if I pay out more than the minimum I'm allowed to anyone without their own policy then I get charged more. All my subs have their own WC policy just like I do so its not a factor for me. The way I understand it is that the policy holder is responsible for themselves as the business owner but anyone they hire who does not have a policy is covered by their policy.
So I'm not covered by WC & my subs are not covered by WC but we all are paying for a WC policy. Only the insurance companies could figure out a way to get everyone paying while noone is covered.
The best things in life are free but not everyone is willing to pay the price.
I thought about that last night. Because even workers comp has its limitations. However I have read that Virginia law states that any person covered under workers comp can not go after their employer after for additional funds, but is bound to the workers comp policy payouts.
Originally Posted by wolfstrike
Sorry, I forgot to mention I have no employees, I just work for myself.
Originally Posted by acmanko
I think it really comes down to what is considered an employee. According to the file I read (linked below) In most cases, an "independent contractor" is not considered an employee. I wonder if this means that I couldn't legally go after a customer for an injury. If this is the case then the customer should have nothing to worry about. According to the file, there are exemptions to who is considered an employee, I will list the top two:
Domestic workers (hired primarily for the performance of household chores, home maintenance, or the care, comfort, and convenience of household members)
I figure this mostly applies to babysitters. However the words "home maintenance" struck me, as practically everything I do in the home could be considered "home maintenance".
Casual workers (who do not perform work in the usual course of the employers trade, business, occupation, or profession)
This one may apply to me more so when I'm working in a restaurant. As a service technician, I am not part of the "employers" (the restaurant) usual course of trade as I am not preparing food. It seems to me this would only be an issue if I were working as a sub contractor for another contractor in the same trade, not something I have ran into yet.
In conclusion, I think on Monday I will ride by the insurance office where I have my general liability policy and at least see if I can get an idea on a price. Two thousands dollars a year sapping up "all" of my profits is an exaggeration I admit. However business is only recently taking off, I'm still having to watch every penny going in and out, and at this phase $150-$250 per month is nothing to sneeze at. Especially for something that so far nobody has asked for, and I'm not even sure I need.
Personally I feel that anything much higher than what I pay for my general liability policy for a sole proprietors would be a rip off. Consider this, if I got hurt doing a job for someone, naturally I WOULDN'T file a comp claim against my own policy because my rates would just go up! I'd simply go to the doctor, not tell them how it happened, and just use my own personal insurance. My health insurance kicks in a 100% at $3500, so do I spend $3500 per year on a workers comp plan that has limits and only covers me for work related issues? Or do I just use my own insurance at a $3500 deductible with 0% co insurance after $3500 with no limit?
Next question: Even if I were to get a workers comp policy on myself, I see it is based on payroll. Well, I don't get a regular "paycheck". I get paid when people pay their invoices. My income changes call to call based on how long something takes, how much mark up I can make on parts and supplies, and other factors. My annual income is determined by the profit/loss figures on schedule C. So from what source would they base the premium on such a policy?
Last edited by moon_shadow; 02-23-2013 at 01:36 PM.
Reason: I forgot to add the link
I would also like to mention that I have been working since I was 16 and I'm 32 now, and in all that time I have never had to file a comp claim. In fact, in all my life I have never been to the ER for any reason what so ever.
(knocks on wood)
Excellent post. However....I was also indestructible when I was only 32...didn't care about health insurance or anything like that because I grew up in a household that my father had his own business...back then, you could work and afford to pay a doctor and not have to have "insurance"! and I also mean you could go to a hospital for a week and NOT NEED INSURANCE.
Originally Posted by moon_shadow
You seem to have a good grasp of what it takes. Get your quotes for WC and then evaluate it vs. what you already know. In VA, they also look at an subs you use that don't have WC insurance as counting toward your 3 employees. Some commercial customers require WC and you end up paying for it anyway.
Also, there are some misconceptions in your long post.....If you get hurt and have your own business...and you have private insurance vs. workers comp...you will have a fight on your hands....AS you private policy will say YOUGOT HURT ON the JOB, so we are not paying go after you WC carrier.....
I wish I had a $1.00 for every response I deleted.....
"Decidedly Superior in a twisted pathetic way".....
Yeah, that's what I'll do. When I took out my general liability policy the agent told me if I needed more, the insurance company would have to issue something like an "umbrella" policy. Which I'm assuming should just about include everything I need to do some serious business. Currently I'm insured at one million general liability. However I've been told that many chain restaurants want at lest three million and workers comp insurance.
Originally Posted by beshvac
To date my customers have been mostly mom and pops. In order to justify the extra premium of several thousand dollars per year I'd like to pick up at least four or five steady chain customers. For instance I've been told by another contractor friend that Applebees requires such coverage. I don't know about Ruby Tuesday, but my understanding is Ruby Tuesday has entered into a contract with Hobart Corp that they MUST use Hobart for their repairs. Then again, mom and pop usually pay when the job is invoiced. Chains require a month or two.
I have been trying to snag a county school system. The extra coverage could be a nice feather in my cap if we ever sit down and negotiate.
I received quite a bit back on taxes this year, if I can afford it, I'll give it a shot and market like hell to grow the business enough to pay for the continued premium.
BTW: On an earlier post it was mentioned I should raise my rates. As of January 1 2013 they are raised to $60 per hour for restaurant work, which is about in line with other one to two man outfits in this region.
My thoughts would be to spend a few dollars and ask a lawyer.
My non-legal opinion.....What type of ownership do you have with your business.. Sole Proprietory, S-Corp, C-Corp, or LLC?
If you're a Sole Member LLC, you can't get Workers' Comp. Everytime I have to fill out something....and there's alot of 'somethings', and they ask for/require workers comp, I write in "Sole-Member LLC", and thats all they need. Of course you have to be a "Sole-Member LLC".
Last edited by STEVEusaPA; 02-23-2013 at 05:48 PM.
I operate as a self employed (with no employees) sole proprietorship. (not an LLC) I recall one insurance agent telling me that I couldn't obtain workers comp on myself, however he was the same agent I use for auto and his business wasn't really business insurance, rather home owners and auto so he really didn't know.
Originally Posted by STEVEusaPA
I took out my general liability police with a local agent who brokers for Erie Insurance Company. I am eager to speak with her on Monday in regards to all of this and see what she suggest. If she tells me it's not necessary, I will ask her as to "why" so that I have something to tell my customers should they ask.
All told if it doesn't an arm and a leg and require a first born for collateral, I would probably give it a go just to increase my market a bit. If it is enormously expensive I'd probably just stick with the status quo for now as it is trickling in little bits of money here and there. When I started this business I basically sunk my entire 401K into it, only to find I made a lot of purchases that were utterly a waste of money. I'm trying to avoid making the same mistake twice.
The important thing is I do have the general liability, which is a "must have" for a sole proprietor, as with such a business structure, all of your assets, business AND personal are on the line.
I will report back here with my findings for future reference.
I'm curious, what purchases were a waste of money?
Originally Posted by moon_shadow
"The bitterness of poor quality remains long after the sweetness of low price is forgotten". --Benjamin Franklin
"Don't argue with an idiot, they will drag you down to their level and beat you with experience". --Mark Twain