Do You Need Workers' Compensation Insurance?

Let's say you hire a worker part-time for the summer to help you care for children in your family child care business. The worker falls down the back steps of your home and suffers a broken leg. Unfortunately, you didn't properly withhold payroll taxes for this worker.

Your biggest problem will not be that the IRS may track you down and make you pay back payroll taxes. Instead, you should worry more that your state workers' compensation office will come after you for failing to purchase workers' compensation insurance.

Why? Because you could be forced to pay the entire medical bill of your worker as well as a stiff penalty (into the thousands of dollars in some states).Unfortunately, many family child care providers are not aware of this peril and don't purchase workers' compensation insurance when they should.

Workers' compensation insurance covers the injuries of employees who are injured while on the job. Injured workers can receive benefits such as payment of medical bills, lost wages, disability income benefits, and more. State laws vary, but in most states child care providers must purchase workers' compensation insurance whether hiring part or full-time employees. In some states you may even be required to purchase this insurance when hiring family members!

Claiming that your worker is an independent contractors won't relieve you of your responsibility to purchase this insurance. The worker's health insurance policy won't cover her when she is injured on the job. Instead, the worker will have no recourse except to make a workers' compensation claim. If you have a business liability insurance policy it will not cover you for injuries suffered by your employees.

The cost of workers' compensation insurance is usually based on the amount of wages you pay in a year. To purchase this insurance contact your business liability insurance agent or an independent insurance agent. You can also contact your state workers' compensation insurance office for assistance.

For more information see my Family Child Care Legal and Insurance Guide.

Image credit: https://www.thebluediamondgallery.com/financial03/w/workers-compensation.html

For more information, see my book Family Child Care Tax Workbook and Organizer.

Tom Copeland, www.tomcopelandblog.com