To Be Included or Excluded? Owners and Workers’ Compensation Coverage

No, we aren’t talking about having FOMO for not being invited to that virtual party your neighbor hosted last weekend. We are talking about Workers’ Compensation insurance instead! Aren’t you excited!?! But really, although it seems as simple as choosing to be included in coverage, it is not and we are going to have a quick chat about why.

What do you mean, including/excluding owners from coverage?

As an owner, you can choose to be included or excluded from your Workers’ Compensation policy. Depending on the state, you may be automatically included or excluded from coverage and may have to fill out a form confirming your choice. Not only that, but each state has a minimum payroll that each included owner must be rated at if they are included.

For example, in the state of Arizona, any working member of the LLC that owns less than 50% of the membership interest, is required to be included in coverage with at a minimum payroll of $57,200.  That means that if John Smith wants to be excluded and takes no payroll but is a minority shareholder with only 10% shares in his company, he must be included and with a $57,200 payroll.

How incredibly inconvenient…

If John buys out another owner and has 55% shares in the company down the road then he can be excluded. But, as the state of Arizona automatically includes owners in coverage, he will need to complete an owner exclusion form. If he doesn’t do this, then he is included. Also, he is going to literally pay for this as most carriers are unwilling to go back in time and exclude owners that forgot to complete their forms.

What do I need to know about including/excluding myself from coverage as an owner?

It is important to know that not all health insurance policies will cover work-related injuries. Regardless of whether you are on the floor coaching or in the back doing administrative duties, if you get hurt on the job, your normal health insurance may not cover you. And let’s face it, if 2020 has taught us nothing else, its that anything can happen.

NEXOSync does have the option to include owners in coverage with no forms and no minimum payroll. You just have to pay yourself a small wage in order to be included in coverage. Excluding yourself is just as easy and no additional paperwork is required.

We at NEXO would be happy to chat with you about your choices so you can make the most educated decision for you and your business.