Should I Elect to be Included or Excluded on Work Comp Coverage?

By | March 26, 2012


Justin Robinson, CIC

Account Executive

The Buckner Company

An owner of a construction company was working in a trench when it gave way and caved in on him. He was buried from the chest down and in critical condition. Fortunately, he is alive and well. The lessons he learned through this experience are important and should be shared.

The owner did not elect work comp coverage so he turned to his health insurance provider. When he submitted the claims to his provider, coverage was denied based on the fact that it was a work-related injury.

This was a very unfortunate and tragic event that potentially could have been avoided with better safety procedures in place. Regardless of whether the accident could have been avoided, one thing is for sure—coverage would have been granted through workers compensation or his health care provider, had he taken the necessary steps.

The question I am frequently asked when I discuss workers compensation insurance with my clients is:

“Why would I, as one of the owners, officers, partners, or members of the company, want to pay for workers compensation insurance on myself when I would never file a claim? Besides, I have health insurance.”

Fallacy.  Not all health insurance policies will cover job-related accidents. In fact, most health insurance policies exclude them unless a special rider is put in place.

This is a topic that I would like to address as it greatly concerns me.

An owner, officer, partner, or member of a company has the option of being included or excluded from workers compensation insurance.

Question: “Why would I want to exclude myself from coverage?”

Answer: SAVINGS.

LLC Members, Partners, and Sole Proprietors:

Are automatically excluded from the workers compensation coverage, but by written request may elect to be included. Each member, partner, and/or sole proprietor that elects coverage will be rated on a stated amount of $38,064 in payroll regardless of the amount of money paid to them by the company (Utah stated payroll effective 12/01/2010).

Officers of a Corporation:

Are automatically included in the workers compensation coverage, but, by written request, may elect to be excluded. Each officer that does not opt out of coverage is subject to a minimum payroll of $38,064 and a maximum payroll $152,256 regardless of the amount of money paid to the officer by the company (Utah stated payroll effective 12/01/2010).

No matter what the savings is, I recommend that all owners, officers, partners, and members of a company elect to be included in the workers compensation coverage; unless the following steps have been taken to replace it:

1. Health Insurance Policy with a rider that covers job related injuries. Again, don’t assume your health insurance policy automatically covers you for on the job injuries.

2. Disability Income Policy which will provide reimbursement for lost income from a job related injury where you are unable to resume any sort of work duties.

3. Life Insurance Policy that equals the amount of the death benefit offered through the workers compensation policy.

Please contact me with any questions regarding your workers compensation policy.

Please be safe out there, don’t take shortcuts, know your insurance coverage, and remember every decision that we make affects not only ourselves but those around us.

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