Accidents happen! They occur even in the safest and cleanest work environments, which is why you must have insurance.

Workers’ compensation insurance protects you, the employer, against lawsuits resulting from work-related accidents, providing medical care and compensation for lost income to your employee(s).

The coverage is designed to ensure that employees who are injured or disabled while on the job receive proper compensation, negating the need for lawsuits regardless of who is at fault. Dependent coverage for workers injured, or even killed by work-related accidents and illnesses, is one of the many benefits of workers’ compensation coverage.

Imagine this scenario: Jessica Park decided to open a small self-storage facility. In the beginning, she was the only person running it. When she purchased her business insurance, she told her agent she didn’t need workers’ compensation coverage because she managed the site, and didn’t mention she may hire employees in the near future. As business picked up, she continued as manager, but hired two full-time and two part-time employees.

Is there a problem in this scenario? Probably. Workers’ compensation laws vary by state, and most states have some form of statute or requirement regarding coverage. Businesses that meet certain criteria must provide workers’ compensation for all employees, or face fines and consequences.

In nearly all 50 states, you are required to cover your employees for workers' compensation. Remember, your general liability coverage has exclusions relating to injury to anyone who should be covered under workers’ comp. Therefore, this important coverage must be considered a mandatory part of your insurance portfolio.
 
Defining the Employee

The real question when considering workers’ compensation insurance is determining who qualifies as an “employee.” By definition, an employee is someone hired to perform services under the direction and control of another person or company, known as “the employer.” Since each state defines what constitutes an employer, Jessica must determine the exact relationship her business has with her hired help. A rule of thumb is an employer is any person or entity who gives direction to and exercises control over a worker.
Workers’ compensation is intended only to cover employees, so it’s important to define the difference between an employee and an independent contractor. An independent contractor makes an agreement with a person to provide a service, but remains in control of the work performed. These specific services should be bound by written and signed agreements.

Hiring an independent contractor can be beneficial because you don’t have to withhold federal, state and Social Security taxes, or pay for unemployment or workers’ compensation insurance. In fact, facility owners don’t have to offer much of anything to independent contractors, except for what’s agreed to in the contract.

Also, keep in mind that when you hire a licensed contractor or vendor, you assume the work and materials will be of high quality and the workers involved will be competent. This is true in most cases. However, misfortune can happen to even the most reputable company. Accidents that result in property damage or injury to your clients, employees or the general public are known to occur. Hiring contractors that have proper insurance coverage is imperative to protect your business. Get references from past clients, and request a certificate of general liability and workers’ compensation insurance.

Remember, when hiring any employee, follow your state’s statutes and purchase adequate workers’ compensation insurance to protect your business from staff-related injury or illness claims. When hiring licensed independent contractors or subcontractors, ensure they carry adequate insurance to reduce your liability in vendor-exposure claims.

Hiring friends and family may be less expensive in the short run. However, if they are injured or cause damage to your facility, it could become more costly and cause hard feelings. Be aware of the business aspects of running your facility in a professional manner.
 
Get Quoted

When getting a quote or purchasing a workers’ compensation policy, most owners exclude themselves from the coverage. This is done for various reasons, but primarily because business owners would not turn in this type of claim against themselves. Since the premium is based on annual payroll and the number of employees, by eliminating the owner, the premium is lower.

Most owners would prefer to use their own healthcare benefits for coverage in the event of an accident or injury, saving premium dollars. Be sure to include any friends and family members working part or full time, as they should and will be considered employees.

To obtain a premium quote, you’ll need some information regarding the storage facility, along with your estimated annual payroll for the current year and the number of part- and full-time employees. Workers’ compensation is a vital, reasonably priced product and should be purchased if you have one or more employees.
 
Note: The insurance company’s liability for coverage in the scenarios described herein is subject to the terms, definitions, conditions, exclusions and limits of liability of the policy. These examples in no way obligate either the insurance company, or any party to the program to respond to claims for coverage not granted by the policy.
 
Randy Tipton is the owner of Universal Insurance Facilities Ltd., which has provided specialized insurance coverage to the self-storage industry for more than 12 years. Universal has clients in 49 states, with a commitment to providing A-plus-rated service; fast, fair claims handling at an affordable premium; and agents trained specifically in self-storage. For more information, call 800.844.2101; e-mail [email protected]; visit www.universalinsuranceltd.com.

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