(Written by Ronnie Letcher – Originally published in the March 2012 Housing Journal)
Workers’ Compensation Insurance – Owners and Officers Should Cover Themselves
Nearly every week of my 39 years in the insurance business I have spent time trying to convince an owner or officer of a business why they should purchase workers’ compensation insurance on themselves. In New Mexico sole proprietors, partners, and corporate officers owning 10% or more of a company can exclude themselves from coverage under a work comp policy they have purchased for their business, however I feel this is almost always a bad decision.
First, let’s examine what a workers’ compensation policy is and what it can do for you. The coverage is for on-the-job injuries, including vehicle accident injuries. It really is a unique policy providing life, disability, medical, and liability insurance all rolled into one document. The dependants of an employee dying from on-the-job injuries and who earned at least $1,100 per week will receive over $500,000 in “death” benefits. The dependants of a worker earning half that much can still expect to receive over $375,000. In New Mexico workers’ compensation pays 100% of an employee’s medical bills for injuries sustained on the job. In fact, such benefits could be payable for life if a severe injury requires ongoing medical treatment. That’s right, life-time medical benefits! It is the only coverage that I know of with such a rich medical benefit. What’s that worth? In addition to medical benefits the policy is also a disability insurance policy paying the injured employee while they are off work. An injured employee can receive up to a maximum of 66 2/3 of their average weekly wage ($733.16 max per week) for as many as 500-700 weeks, depending on the injury. And it’s tax free! Last but not least, a workers’ compensation policy provides employers liability protection in the event a business owner is sued for gross negligence resulting in the injury or death of an employee. While gross negligence is very difficult to prove, a lawsuit could be very costly to defend.
Most health insurance policies today do not provide coverage for on-the-job injuries. Unfortunately most injured owners and officer find this out too late. Please believe me: It happens all the time!
Of course we need to discuss the cost of this coverage. You can purchase work comp insurance to cover yourself from as little as $25 a month or as high as $1,000 a month, depending on your job and your salary. Most owners covering themselves are going to pay somewhere in between these amounts. It’s a business expense, and I would truly say it’s very inexpensive when you consider the cost if you don’t have it and need it. Call your agent today for a full and complete review of your situation and a quote.
Ronnie A. Letcher, C.I.C. is an Independent Insurance Agent in Artesia, NM and the Marketing General Agent for Builders’ Trust of New Mexico. He has been a member of NMHBA for over 30 years.