I have health insurance -- Why do I need Workers Compensation?

This question highlights the need to use a full service Independent Agent qualified to coordinate Health, Disability and Workers Compensation coverage. Many health insurers are starting to qualify or exclude coverage for work-related injuries under group health plans yet the old rule of thumb was exclude corporate officers from Workers Compensation to save money. A corporate President injured in an auto accident or by a falling file cabinet may face a huge medical bill with no insurance unless all the company's coverages are coordinated.

In most states, sole proprietors and partners are not covered as employees under the Workers Compensation act, but may elect to be covered. In some states the option to be covered applies only to sole proprietors and partners whose employees are covered under the act (either by law or by the employer's election).

With respect to executive officers of a corporation, the general rule is the opposite of the general rule for sole proprietors and partners. In most states, the officers of a corporation (including the executive officers) are covered, but provision is made for at least some officers to exempt themselves from coverage under the act. Many states allow only the corporation's executive officers to exempt themselves; which officers are considered executive officers may or may not be spelled out in the act. Other states do not specify which officers can exempt themselves, but allow only a specified number of corporate officers to exempt themselves.

A number of states address the status of limited liability company members and managers. This relatively new type of legal entity is a hybrid that combines features of both corporations and partnerships.

Keep in mind that, in many states, those who voluntarily exempt themselves from coverage under the act retain the right to sue the employer for damages caused by the employer's negligence. However, the standard endorsement used to exempt corporate officers and others from coverage under the employer's workers compensation insurance policy eliminates both workers compensation and employers liability coverage for injury to these individuals.

Bottom line, coordinate coverages -- don't just try to save a WC penny and end up having multiple pounds of your own pocketbook eroded.