Tip of the Month for October 2014

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Do You Need Insurance for Your Employees

Recently, discussion about employee insurance has centered almost exclusively on health care and medical insurance and the government’s efforts to promote affordable health insurance. Health and life insurance benefits are important considerations for job seekers, and offering health insurance can help employers retain valuable employees. However, there are other types of insurance you might be required by law to provide for your workers. Here’s an overview of various types of insurance to guide your planning.

  1. First determine what type(s) of employee insurance is mandatory for the employees in your business, and under what conditions you are required to provide that insurance. Your state labor office can give you the relevant guidelines.
  2. Unemployment insurance is mandatory if an employee is paid more than $1,500 in any quarter of the year – with the exception of farm workers. Employers are required to pay federal unemployment insurance to the IRS for eligible workers. This is used to provide benefits when workers lose their jobs. You must register with your state’s workforce agency if you are required to pay unemployment insurance.
  3. Most states require employers to obtain Workers’ Compensation insurance designed to provide benefits to workers who are hurt on the job. There is a lot of variance from state to state regarding this no-fault insurance that covers medical expenses and other associated costs – regardless of what caused the injury. Some states don’t require workers’ comp, some always require it and others base the requirement on the number of workers employed or grant exemptions based on the type of work performed. Requirements on how you choose to insure your workers’ compensation liability can vary quite a lot from state to state, too. Some states require coverage to be provided by a commercial insurance carrier, others accept self-insurance and others require coverage through the state’s workers’ compensation insurance program. Some types of work environments might be more potentially dangerous than others, and sometimes employers provide workers’ compensation benefits although not required by law to do so, in order to attract quality employees. Whether you live in a state that requires workers’ comp or not, it is a good idea to contact your state labor office to determine what obligations you may have to fund coverage and/or whether you are obligated to advise employees in writing that they aren’t covered.
  4. Currently, disability insurance is required in only five states: California, Hawaii, New Jersey, New York and Rhode Island, as well as Puerto Rico. Disability insurance is designed to provide partial wage replacement when employees are sidelined by sickness or injury that is not work related. These states may require employees to pay for some of the coverage. The individual states determine whether the coverage comes from a self-insured plan or through a state-administered disability insurance plan.

You may live in a state where mandatory employee insurance requirements are minimal, but you might want to consider offering additional programs to improve the benefit package you offer to valuable employees. Additionally, non-mandatory insurance might help protect your business against unforeseen loss or injury.


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