Workers Comp Blog

Owner/Officer Inclusions and Exclusions for California Workers Compensation and all Other States

As the business owner, you are used to putting yourself last; the last to leave the office, the last to take your lunch break, the last to get paid. However, should this be the case for your California workers compensation insurance coverage? When it comes to workers compensation, which will take care of your employees and team should they experience any injury while at work, you have the option to be included or excluded. Let’s discuss whether a business owner can and should be covered by their own business’ workers compensation policy and what the regulations are when it comes to this option.

To Include or Not to Include
Before discussing regulations, first thing is first: Should you, the business owner, include or exclude yourself on your California workers compensation policy and or quote? To make this decision, we must analyze the benefits and drawbacks of being excluded, which is a common route that many owners choose.

Pros of Being Excluded
1.You save money on your workers compensation policy/quote by waiving your own coverage which is always helpful when trying to grow and manage a business

Cons of Being Excluded

  1. Requires strict documentation to avoid any potential lawsuits
  2. You may not have any coverage for yourself at all. Many owners exclude themselves because they assume that their healthcare will cover any medical costs they may need however many health insurance carriers exclude work-related injuries unless a rider is added to your health policy, and does not usually cover disability income as thoroughly as workers compensation coverage does. The industry you are in can make a difference in your decision as well. For instance, if you work in a white-collar industry, you have a lower risk of on-site injuries and thus may not deem inclusion necessary while blue-collar industry business owners have a higher risk of on-site injuries and may not even consider being excluded because of this. Overall, every California business owner has a right to decide whether they want to be included or not and your insurance agent should discuss this with you before binding your California Workers Compensation policy and or quote.

Owner Inclusion Rules

  • These rules differ depending on your state. With that in mind, consider the following regulations:
  • In most states, executive officers are automatically included unless they opt-out while partners and sole proprietors are excluded unless they decide to opt-in.
  • In order to make any changes, you generally must fill out and sign specific forms from your insurance provider which may need approval from a state agency before the policy/quote can be issued, preferably with the application depending on the state.
  • Accepting or rejecting owner coverage in one state does not automatically mean this will be the case in another state so you may have to repeat the process for another state if you have coverage in multiple states

Minimums and Maximums

To help determine workers compensation ratings, each state sets payroll minimums and maximums for owners and officers. Sole proprietors and partners have a set payroll amount to calculate premium for excluded owners while officers and LLC’s also have a minimum and maximum payroll used to determine their premium.
These minimum and maximum payrolls for owners do not affect the medical portion of coverage but can affect disability payments. Since disability payments are based on the owners’ average payroll before a disability, higher payroll provides more income replacement if temporary or permanent disability occurs.

Overall, whether or not a business owner should include or exclude themselves from their coverage depends on their preferences, goals, needs, and risk. Contact a qualified California Business insurance agent that understands what option would best serve you and your business and who will include your decision before binding coverage to ensure you receive the best rated California workers comp quote. You have the right to be well informed and make the ultimate decision for the sake of you and your business, which just may, to your surprise, be putting yourself first this time.