Should I Exclude Officers on my Workers’ Compensation Policy?

We know how cripplingly expensive workers’ compensation can be.

So if you’ve heard you may be able to exclude your company’s officers from your workers’ comp policy, you might be tempted by the opportunity to save a little money.

But is it even an option for your company? And if it is, is it a good idea?

At Berry Insurance, we’ve guided many of our business owner clients through this same situation, and we can help you too!

In this article, we’ll explain what workers’ compensation is, what it covers, and how it could benefit your company’s officers. After you’ve finished reading, you will feel more equipped to decide whether you want to exclude your officers from your policy.

Table of contents:

• What is workers’ compensation and what does it cover?
• Do I need to include officers on my workers’ comp?
• Why you should consider covering your officers:

What is workers’ compensation and what does it cover?

Workers’ compensation insurance covers medical payments and a portion of lost wages for employees who become injured or ill due to work-related causes.

For example, if an employee gets injured lifting something heavy or slipping and falling on a wet floor, medical expenses and some lost wages would be covered by workers’ compensation. Or, if an employee becomes ill from being exposed to harmful chemicals on the job, that would also be covered by the insurance.

Like every other form of business insurance, workers’ compensation insurance has a list of conditions and exclusions. Here is what you can generally expect to be covered (and not covered) by a workers’ compensation policy:

What is typically covered:

• Injuries to all employees regardless of hours worked
• Medical expenses
• Lost wages (limited)
• Ongoing care expenses
• Funeral expenses
• Treatment for work-related illness
• Repetitive injury care
• Disability benefits (limited)
• Employer liability

What is not typically covered:

• Small cuts/scrapes remedied by a first aid kit
• Injuries sustained outside the scope of work
• Injuries to individuals that are not your employees
• Out of state operations (optional)

Do I need to include officers on my workers’ comp?

Covering your employees through a workers’ compensation policy is a no-brainer. In fact, in Massachusetts, all corporations are required to have workers’ compensation insurance for their employees. Without coverage, employees could sue their employer for injuries or illness sustained on the job.

But what about your officers? Do you need to include them on your policy? 

Well … it depends. In order to find out, you need to ask yourself this question:

Are the officers company owners?

In general, according to MA law, corporate officers must have workers’ compensation coverage.

However, there is one exception: if the corporate officers own at least 25% of interest in their corporation, they do not need to be included on the company’s workers’ comp policy.

In this case, these officers are automatically covered at a minimum of $14,040 and a maximum of $70,200 of payroll. (These rates change annually, but you can find the updates on the Workers’ Compensation Rating and Inspection Bureau of Massachusetts website.)

However, corporate officers can request to opt out by filing Form 153 - Affidavit for Certain Corporate Officers or Directors with the Department of Industrial Accidents (DIA).

But just because you aren’t required to have the coverage doesn’t necessarily mean you shouldn’t.

Why you should consider covering your officers:

At Berry Insurance, we recommend that all of our commercial clients have workers’ compensation coverage for their company officers. 

Here’s why:

Health insurance may not be enough:

As a rule of thumb, health insurance policies don’t typically cover work-related injuries.

If your officer were injured doing something work related and needed medical care, their health insurance might identify it as a work-related injury and decline coverage. This means they would be paying for all related medical expenses out-of-pocket.

With the increasing costs of healthcare, paying for medical bills without the help of health insurance can be nearly impossible.

Even a short trip to the emergency room for a few stitches could cost thousands, so if your officers were to experience an injury or illness requiring more extensive care, their medical bills could be crippling.

Workers’ compensation is pivotal to ensuring one of these situations won’t become a huge financial hardship.

Officers wouldn’t have benefits if they had to miss work:

In addition to paying directly for medical payments, workers’ comp provides another crucial benefit for employees: lost wages.

If your officer’s injury or illness causes them to miss some work, workers’ compensation insurance will help replace some of the wages they lose.

Workers’ comp may not pay for every single penny your officer would normally make, but it could help keep them financially afloat during their recovery period.

Make the most of your workers’ comp policy for the right cost

Although your officers may never need it (fingers crossed you don’t), workers’ compensation can save them from significant out-of-pocket medical bills, and lost income due to injury or illness.

If you don’t mind spending a few extra bucks on your commercial insurance, getting the coverage for your officers may be right for you. 

Speaking of cost – I realize if you’re considering excluding officers from your workers’ comp policy, cost might be a factor for you. 

To learn more about how workers’ comp cost is determined, how much you can expect to pay, and ways to save, read this article: How Much Does MA Workers' Compensation Insurance Cost?