It happens every day. On average, 100 people die in vehicle accidents, and many more are seriously injured. Regrettably, it could happen to you, too. This article will address the financial ramifications of a serious job-related injury, specifically, who will pay.

It is well settled in American business law that employers are responsible to their employees for the costs of job-related accidents. Workers Compensation laws have been on the books for the better part of a hundred years.
But what if the employer is also the employee? Strange as it may seem, a self-employed entrepreneur, such as a mobile tool dealer, is actually permitted by most state laws to neglect their employees (themselves) in this important area. It is almost as though the law is saying “we’re looking out for your employees by requiring you to buy Workers Compensation insurance for them, but we don’t require that you do the same for yourself.”

You won’t find those exact words in the law, but the effect is the same. Just because it’s legal not to insure yourself doesn’t mean it’s a good idea — for you or your family. Many bad choices are legal. Perhaps you can think of a few yourself.

Many self-employed people rely on their medical insurance, or their spouse’s, to pay their expenses for job-related injuries. There are two problems with this.

First, it is unusual, if not rare, for medical benefits to pay for work-related injuries. 

You may know of a situation where such a claim was paid by a medical insurer, but that’s no reason to rely on it. Medical insurers are logically more inclined to investigate a large claim than a small one, so don’t be lulled into a false sense of security. If you submit a job-related injury claim to your benefits insurer for a few thousand dollars, chances are it will be paid without much scrutiny. However, if you have a major claim, questions will be asked, and the claim could easily and properly be denied on the grounds that it was job-related. This isn’t what you want to hear when you first come out of a coma.

Secondly, lost income is generally not covered at all, especially if you are relying on your spouse’s benefits. Employers offer long-term disability coverage for their employees, not the spouses. Your Workers’ Compensation benefits, by contrast, cover medical expenses as well as lost wages. The payment for lost wages is 67% of your salary, subject to certain limitations. These benefits are not taxable income in most cases, and they are payable until you are eligible for social security.

Here’s something else to be concerned about. If you have drivers and treat them as independent contractors, you could end up with a serious problem. The status “independent contractor” may come under scrutiny by the Workers Compensation authority in your state at the time of a claim. Your “contractor” drives your truck on your route and is subject to your direction. This may lead to a finding that an employment does indeed exist. If so, you might be in violation of your state’s laws and legally liable for Workers’ Compensation benefits.

This unhappy combination of news would add up to a pretty bad day at work. The advice of qualified legal counsel is strongly encouraged. You should get that advice now, not after the loss. It will cost less, and it will do you more good. 

Need another reason to make a good business decision about Workers’ Compensation? Some companies, such as large contractors, manufacturers or auto service chains, may require that businesses visiting their premises provide evidence of Workers’ Compensation. Readers in Ohio, Washington, Wyoming and North Dakota will need to contact their state Bureau of Workers’ Compensation.

Feel free to e-mail the writer at the address below.

The information in this article is not intended to be a substitute for qualified legal or tax advice.  

Steve Shechter is the president of Evans Insurance Agency in Akron, OH. He can be reached at [email protected] or (330) 535-8157.