Self Employed Car Accidents For Fun and Profit

Self Employed Car Accidents For Fun and Profit
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I read in the Off Topic forum a discussion on car accidents and it mentioned an interesting concept - that if you’re driving a work vehicle, then you might need to use workman’s comp instead of your car insurance.

So this leads me to wonder, what if you’re self employed? I don’t think workman’s comp is available if you’re purely self employed, but is actually mandatory if you formed an S-Corp and pay yourself as a W2 employee.

I’ve avoided W2ing myself for this reason because it seems like a hassle to do payroll taxes and pay for things like workman’s comp. However, I wonder if setting this up would mean that I can reduce my car insurance down a little bit if Workman’s Comp will cover a car accident, if I claim that I am at work.

Questions:

  1. Any issue making a workman’s comp claim if you are the sole employee of an S-Corp that you solely own?

  2. What are the general limits of workman’s comp?

  3. If the claims exceed workman’s comp limits, does your health or car insurance kick in to cover the rest? And if so, does it reduce the total allowed paid by those separate policies? Or are they additive?

  4. Is workman’s comp better or worse for the doctors involved? I know medicaid is notoriously cheap and doctors avoid those patients. If I show up with a workman’s comp case, will I receive better or worse response than if I am using car insurance or private health insurance? I know that by law, doctors aren’t supposed to discriminate, but the reality is different and I know small practices especially will discriminate and prefer patients who have better coverage or are paying cash (with respect to how soon you can get an appointment and how long your appointment lasts in the case of physical therapy or chiropracty).

  5. All else equal (ignoring costs associated with S-corp versus pure 1099), if you got into a car accident, would you rather be a W2 of your own S-corp or be a 1099 with a slightly better car insurance policy so that it would equal same total amount workman’s comp would pay?

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Apples to oranges comparison. Your car insurance won’t cover your medical bills any more than workman’s comp will cover the car’s repair bill.

My car insurance has a medical bills provision. I think it caps out at $10k and I don’t currently pay for it.

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TripleB, I like the way you think!

I don’t know much about workers comp. I think the big question is whether your rates would increase after a claim.

Without an employee other than yourself, it will be hard to find a comp policy, most carriers don’t want to sell them, and this is one of the reasons. Too hard to quantify the exposure of an owner who os always working.

There have been some recent changes in the landscape at least in CA that have changed the ways owners were covered as well, but back when I was underwriting most carriers wouldn’t want to even include an owner in coverage if they had employees for the same reason. Owners of a Corp can exclude themselves, and that’s how everyone would prefer it. Have to admit I’m not an expert in other states.

If you pull off getting coverage and actually have a claim, comp has no limits. It pays all medical bills and lost wages for the extent of the injury as well as permanent disability benefits for something really serious. This is why it’s so expensive. I’ve seen multiple claims of 7-10 million on $5,000 policies.

Also if you have a claim in a scenario like this, I doubt you will ever find anyone to sell you another comp policy with yourself included again. It’s just not really what the coverage is intended for and at this point there is still too much human underwriting intervention to sneak back through. And if you hire employees and need coverage in the next 3-5 years it may crush you in the rate dept.

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When you say $5k policy, do you mean the annual policy is $5k?

How much does worksman comp cost for larger employers? I assumed it was under $1k per person, otherwise how can any employer afford to hire anyone, when you add in health insurance, workmans comp, unemployment insurance, FICA taxes, paid sick leave, maternity leave, etc? It must cost twice as much as the salary paid to the employee when you add in the cost of these other things.

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Yes annual premium. Rate is payroll based and varies based on your business. Just as a base the rate for an office employee is 0.5% or so of payroll, a mow and blow landscaper might be 10%, a remodeler 25%, or a roofer 45%.

So your average run of the mill gardener is paying $4K a year for comp for a $40K payroll employee. One of the reasons under the table employees for contractors are so prevalent, and so many just lie and don’t carry comp.

Large employers will get more of a break just based on the law of large numbers, you can estimate their loss activity a little easier and more accurately.

Edit: the above rates are all in CA. most other states are significantly cheaper.

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You car insurance’s medical bills provision doesnt cover your own medical bills. Your health insurance covers your medical bills, unless a third party is liable for having caused your injuries.

A Workers Comp policy is going to dig really deep before approving a claim for a self-employed person. If you want to use it as a replacement for health insurance, you’ll be dancing along a very fine line with potentially very severe consequences should you fail to stay on that line.

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3 --> The claims won’t exceed comp’s limits which are unlimited … other than your patience. However, they will try to recover from any other insurance that they can.

4–> I’m sure that the fees comp companies pay to doctors vary by state, but in NY, they were significantly lower than private insurance. You will find some doctors and rehab clinics that don’t accept comp patients. The rehab clinics that do tend to have one person who is certified, gets the license, is on premises and writes up the notes for your doctor. That one person may be responsible for a dozen simultaneous patients who are being overseen by a few non-licensed people of varying knowledge / skills / attitudes.

So it sounds like if I am self employed, a workmans comp policy is essentially an enormous waste of money?
There’s one company I considered contracting through and they said they require I maintain my own workman’s comp policy. Most others, don’t care if I have it or choose to skip it, since I am 1099ing or Corp-to-Corping through them.

Sounds like if I was required to get my own workman’s comp policy I’d be paying huge premiums and likely never see any return, even if I did get injured.