Is Excluding Officers and Owners from Workers Compensation a Bad Idea?

Written by April Weismann on 02/02/2017 01:28 AM in Workers Compensation Insurance,. Commercial Insurance.

In New Hampshire and elsewhere, businesses are required to provide workers compensation insurance for their employees. Executive officers and business owners, however, are not typically required to be included but can be if they choose. While excluding officers and owners from work comp can reduce the premium, there are risks. Understand the pros and cons so you can make an educated decision of whether this is the right decision for your business.HPM Workers Compensation Insurance

The Pros and Cons of Excluding Owners and Officers from NH Work Comp

The Positives of Excluding an Officer or Owner from Worker's Compensation Insurance 

In short, excluding officers and owners reduces the cost of workers' compensation insurance because a large part of the premium is determined by your payroll. If you exclude the payroll of owners and officers (up to three allowed), this would likely result in a lower premium. 

Since the insurer will not cover a claim for an excluded owner or officer, the company can charge less. This is the main benefit of excluding officers and owners from coverage -- a business can save money on what it pays in premiums.

Here are some other reasons why business owners and officers feel they don't need to be covered by workers' compensation insurance.

  • An owner cannot imagine filing a workers' compensation claim against their own company, so why pay for something that will never be used?
  • The officer assumes they will not get hurt as they are in charge. 
  • The owner believes that if they do get hurt on the job their health insurance policy will pay for any injuries they sustain.

If these assumptions were correct, excluding officers and owners would be an easy decision. Let's look a little deeper into the reality of excluding officers and owners versus the assumptions frequently made.

The Cons of Excluding an Owner or Officer from Workers' Compensation Coverage:

Assuming a business owner will not get hurt at work because they own the business is frankly naive. Anyone can get hurt regardless of title. Whether executives work behind a desk or with the team in the trenches, executives are subject to the same injuries and illnesses as everyone else, if not a little more.

It is not uncommon for a business owner to have an employee's well-being in mind when, for example, they grab a heavy box from the admin to help, only to wrench their back. Or perhaps they take it upon themselves to shovel the snow from the walkway and fall on ice and slip a disc.

The business owner or officer may have health insurance, but some health insurance policies may exclude coverage for work-related injuries as it is assumed that workers' compensation will pay for the treatment.  Even if there is coverage for the injury, worker's compensation also provides a percentage of an average weekly wage, up to a maximum in disability payments. Unless you had a separate disability policy, this could put a dent in anyone's personal finances as well as a company's.

Workers' compensation insurance will also pay a death benefit to beneficiaries in a work-related accident, so an additional layer of protection for the owners and officers who elect coverage may be available.

For many officers and owners, the increase in risk that opting out of isn’t worth the potential savings. Like all business decisions, the cost has to be weighed with the benefit. It is encouraged that an informed decision is made with the help of an independent commercial insurance agent who can run the cost for your business, including and excluding owners and officers. An agent can also help a business navigate the required paperwork and ensure coverage is understood to protect the business's bottom line.

For more information about workers compensation, contact the insurance professionals at HPM Insurance today.

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