Question for fellow sole proprietors - workers comp ins

[moon_shadow]

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.

Any advise?

[wolfstrike]

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

[acmanko]

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

[moon_shadow]

my non-professional 2 cents...
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.

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.

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

Sorry, I forgot to mention I have no employees, I just work for myself.

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 employer’s 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?

http://vwc.state.va.us/vwc-portlet-c...yers_guide.pdf

[moon_shadow]

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)

[beshvac]

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.

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.....

[moon_shadow]

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.

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.....

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.

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.

[STEVEusaPA]

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".

[lytning]

My thoughts would be to spend a few dollars and ask a lawyer.

[moon_shadow]

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".

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.

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.

[STEVEusaPA]

just a follow up regarding Workers Comp....adding on to my previous post. I did 'have to' get it for a school district job. They're lawyer wouldnt take no (or legal logic) for an answer. So my ins. co. gave me a policy for $100.00...both of us realizing its completely useless, but hey I got the job and made some dough. Same district made me get a rider for on-site fueling of diesel school buses, to cover spilling a specific chemical that is not in diesel fuel. The ins. co gave me that rider for free.....

[acmanko]

There are examples of needing the coverage off of a work site. You could be in traffic accident while in your work vehicle or have an accident at your shop

[air1]

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.

I'm curious, what purchases were a waste of money?

[moon_shadow]

I'm curious, what purchases were a waste of money?

Nickles and dimes mostly. My biggest one probably was I went a little heavy on inventory. I went based on about what I carried when I worked for Hobart. Come to find out that the market I serve now doesn't really require such an inventory. Example: Dishwasher parts. Dishwashers were a big part of my repair when I was at Hobart. Now that I mostly work in locally owned mom and pop c-stores, and smaller restaurants I simply don't have as many dishwasher calls. I now have a better gauge of what I actually use frequently, and have adjusted in inventory accordingly. With the diverse amount of work I do, I practically buy almost everything as I need it. Another big factor was automobile expenses. I have drove around some clunkers last year. I think I finally have a decent truck that will hopefully give me a few years of service, but it's far from new.

I spent $50 on a tamper bit set at grainger, a few months later I discovered one that would have done the job (the exact same kind I had at Hobart) for $15.

To be frank and blunt, when I started I was just so caught up in the "cool factor of owning a business", that I really didn't pay much attention to where the money was going. When the bank account started to get low I snapped out of that mode of thought really quick. Now every expense, not matter how small gets mulled over to the fullest before I write any checks. When it comes to insurance, I don't want any unnecessary bells and whistles, I just want the coverage I need at a minimum cost. In 2013 I resolved to treat my business more like a business, and less like a glorified hobby.

And now, I'm happy to report that the bank account is slowing inching back up.

On a different note, I stopped by the insurance office today, she is going to work up some quotes for me. I hope to hear back later on today or tomorrow.

[moon_shadow]

$4,000 per year

That's unattainable right now, and simply out of the question. That cost more than my home owners (two houses), auto, general liability, health insurance, and dental combined! My max was two grand, and I'd cringe writing that check.

Why is it so much money? Driving a car is a hundred times more risky than me, myself working on a job site, and my auto insurance is $350 per year! (and has almost the same coverage limits)

Good lord. Doctors, lawyers and insurance companies. If any of them make it to heaven, I'd rather burn in hell.

[lytning]

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.

[moon_shadow]

After thinking it over. I have decided that at this phase in the game it's just to expensive, and since I have no employees, I am only covering myself anyway. I can simply make an effort to be as safe as possible. Currently I do not do roof work, and generally speaking I have always played it safe at the job site. I called my health insurance and they said that if I'm hurt on the job it's not covered.

To date not a single customer has asked for it, and with the cost of this coverage, this may be why Virginia doesn't require it for the first three employees. As this would give a business owner a chance to really get his business off the ground before saddling up with such a high premium.

I don't sub contract for any other contractor so that won't be an issue.

Realistically, if something drastic were to happen, I could just about make a payment to the hospital directly for the $400 per month this coverage would cost me and cut out the middle man all together. Couple that with my track record of employment safety, and I'm not going to sweat it.

My liability coverage is $440 per year and I can live with that. My auto is about $350 and it's rated for business coverage. Liability only but it has comprehensive added.

The agent did they could write a policy where as I would basically have a piece of paper saying I have a policy, but the policy doesn't cover anything. He said some contractors have taken those out because they were sub contracting for another contractor. He said this "policy" was about $700 a year.

I'm not going to spend $700 for a piece of paper that realistically means I'm still uninsured for all intents and purposes.

Just going to keep things they way it is. I'm making money now, and as the old saying goes: "If it ain't broke, don't fix it"

[air1]

I called my health insurance and they said that if I'm hurt on the job it's not covered.
"

Are you sure about this? They are probably assuming you are working for someone else and you're covered by WC. Did you explain that you are self employed with no WC. Is it specifically excluded in your policy?

[moon_shadow]

Are you sure about this? They are probably assuming you are working for someone else and you're covered by WC. Did you explain that you are self employed with no WC. Is it specifically excluded in your policy?

Good questions. I must admit, I was in a hurry when they finally came to the line so I didn't get into a lot of detail. But it's 230 AM now and I pulled the policy book they sent me and here is exactly what it said:

We do not cover services or supplies if they are available under workers' compensation for work related injuries or diseases, when the employer must provide benefits by Federal, state, or local law, or when that person has been paid by the employer. This exclusion applies even if you waive your right to payment under these laws and regulations or fail to comply with your employer's procedures to receive the benefits. It also applies whether or not the covered person reaches a settlement with his or her employer or the employer's insurer or self insurance association because of the injury or the disease.

That's kind of a grey area to me. If we read this line: when the employer must provide benefits by Federal, state, or local law, or when that person has been paid by the employer it suggest that since I, as self employed am not required to provide benefits by any government level, and there is not employer to pay me... hummm.. I really don't know.

[lytning]

AS I said been from 1972 with no comp. You can never have an employee though. Should you have an employe and he gets a hang nail you might just as well hand hin the keys to the house, the business and everythink else you owm.
Just my thoughts though.

Good questions. I must admit, I was in a hurry when they finally came to the line so I didn't get into a lot of detail. But it's 230 AM now and I pulled the policy book they sent me and here is exactly what it said:

We do not cover services or supplies if they are available under workers' compensation for work related injuries or diseases, when the employer must provide benefits by Federal, state, or local law, or when that person has been paid by the employer. This exclusion applies even if you waive your right to payment under these laws and regulations or fail to comply with your employer's procedures to receive the benefits. It also applies whether or not the covered person reaches a settlement with his or her employer or the employer's insurer or self insurance association because of the injury or the disease.

That's kind of a grey area to me. If we read this line: when the employer must provide benefits by Federal, state, or local law, or when that person has been paid by the employer it suggest that since I, as self employed am not required to provide benefits by any government level, and there is not employer to pay me... hummm.. I really don't know.