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.
Any issue making a workman’s comp claim if you are the sole employee of an S-Corp that you solely own?
What are the general limits of workman’s comp?
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?
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).
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?
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.
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.
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.
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.
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.
Attorneys are usually going to be super-local as to where they work and the courts / jurisdictions where they work.
Talk to local business owners (contractors and trucking firms have lots of legal experience) or find a few attorneys with really great reviews and ask to sit down for a no-fee 15-30 minute consultation about your situation.
You’ll get an idea of how strong of a case you have and you’ll see if you like their style.
At the end, ask if they have a guess as to how much your situation would cost and what your odds are of doing better with them then you would just dealing with insurance yourself.
Do that 2-3 times and you’ll have a much better idea of where you stand.
If you have a local insurance agent you trust, they might be a good source of info too.
(BTW - this is one of those situations where pre-paid legal plans can pay off - if you already had one.)
General Disclaimer: I don’t consider car accidents of any kind, or by any kind of owner, to be fun/profitable.
Mass-ass Disclaimer: I am not a licensed driver. I am not a licensed swimmer or lifeguard. I am unfamiliar with the roadway and bridges of, and/or near, Chappaquiddick. I don’t drink and don’t make waitress sandwiches with anyone, including Senator Dodd. I’m not a lawyer, certified mechanic, doctor, accountant, registered investment advisor; retirement advisor; reparations, gay, lezbian, transvestite, trans-anything or trans-less-anything advisor. In fact, I am not an educated person in any way shape or form. My comments are not advice. My comments are provided for entertainment purposes only.
If you’re comfortable negotiating on your own (I wasn’t until my 30’s):
If you’re at fault and end up paying the other party, get the other party to sign a (as ironclad as you want) release. Your insurance agent can (should) provide such a release, with you deciding how ironclad it may be. Get it signed before handing over a check, or sign simultaneously. If you’re agent can’t/won’t provide a release, or release template, get a better agent.
If you’re not at fault, and you’re absolutely certain there are no injuries, get the repair done before signing a release. Most repair shops are used to dealing with insurers, and it’s understood that their init quote can be amended once the job is started and unknown damage is revealed. That is a frequent outcome. Thus, if you’ve settled using the init quote, you’ll be out of pocket for the unseen damages.
If you’re not at fault, and you’re absolutely certain there are no injuries, you can use a signed release as a tool when negotiating with the party at fault.
If you’re not comfortable negotiating on your own …
Don’t give a lot of consideration to the lawyers who advertise, as they are usually much better at selling potential clients (and possibly settling) than lawyering. If you need a lawyer, your best bet is a reference from someone that you know and who’s judgement you trust. Over the years, I’ve had multiple neighbors recommend various HVAC companies. After meeting with those companies’ reps, my opinions of those neighbors has been reduced.