Whether you are a 1 or 2 man shop or a 100+ employee company one important area to address is whether you, as the owner of the company or company officer, should include yourself in coverage on your workers compensation policy.
When addressing this issue you are looking at a direct trade off for yourself personally that all owners/officers should fully understand.
The trade off is additional risk for the individual vs. additional premium. As an owner/officer of your company, most states give you the option to include or exclude yourself from coverage, however some states do not. This varies from state to state and your entity type in your state (i.e. LLC, S-Corp, C-Corp, Sole-Proprietor).
Rating for workers comp is based on your payroll, and each state assigns either a minimum and maximum payroll for owners or a flat payroll rate to be used for workers comp rating purposes on owners. If you decide to include yourself in coverage these rules state the limits of what your policy will be based on.
Let’s use Missouri as an example. They require a flat rate payroll amount. The payroll amount for an owner in Missouri as of 1/1/2013 is $36,900 for each owner. This means that each owner who is included would be adding this set amount of payroll for the workers comp premium.
For easy figuring lets say your company is a machine shop and the class code rate for your policy is $5.55 per $100 in payroll, this means the additional payroll comes out to an additional premium of $2,047.95. This is calculated as $36,900 X 0.0555=$2,047.95. These payrolls and rates will vary for business type and payroll amount as this formula shows.
This shows how the premium increase would be factored, It can be looked at as additional costs to you if you include yourself, or additional savings if you choose to exclude. However, the savings for owners/officers if they choose to exclude present added risk to those individuals. Now lets look at the additional risk you are taking on:
For that same machine shop operation, lets assume you are as a company officer making the same $36,900 per year. Workers Compensation covers Medical payments and a portion of lost wages. When you exclude your officer from coverage, this is the risk they are taking on personally.
This becomes both a financial decision for your company and personally to see where you would like to place the risk. This is a decision that should be made factoring in what other insurance you personally have as well as the risk you have in the work you do. If you are doing clerical work, your risk is typically much lower than if you performing roofing work, however the rates are much different as well.