Imagine you are hosting a party at your home, and a guest trips on a crack in the driveway as they arrive. The resulting injuries are serious enough to require surgery, a few nights in the hospital and months of physical rehabilitation. An incident like this could easily lead to a costly lawsuit against you.
Fortunately, your insurance agent warned you about such an exposure that could undo a lifetime of wealth building, and you made sure to have enough excess liability insurance in place to protect you.
Now, imagine the person who trips and falls is your nanny, who was on her way home after tucking your children into bed. Her injury will result in lost wages and piles of medical bills. Who will pay for that?
One way or another, it will likely be you. The hard way is by settling the lawsuit that is likely to follow. A better way is to buy a workers’ compensation policy to cover your domestic employees—and yourself.
What Is Workers’ Comp?
Workers’ compensation is an insurance policy designed to pay benefits to employees injured on the job to cover the cost of medical care, lost wages and permanent disabilities. While commonly associated with businesses, workers’ compensation may be required in many states for individuals and families who hire domestic employees—nannies, gardeners, housekeepers, etc.
From an individual perspective, workers’ compensation does more than just protect your assets from lawsuits filed by domestic employees. It can also help to take care of people who, in many cases, help take care of you and who have become part of the family. While a nanny or a home health aide can be like a member of the family, legally the relationship is one of employer and employee.
Eric Gordon, owner and president of Denver Agency, said that relationships between family and staff are not always as they appear. “When a domestic employee is injured in the home, it is amazing how all that devotion that the client feels for the person has no bearing whatsoever on how the injured person responds,” he said. “They may think the feelings of closeness they have with the employee will obviate a lawsuit, and this is something that can be taken care of privately. In most cases, this is not how the situation plays out.”
Employee or Contractor
If you employ people in and around your house, it can be difficult to determine if and when you need a workers’ compensation policy. Some states set the threshold at a 40-hour workweek, while others set the requirement at fewer hours. Yet others simply state that if a domestic employee follows your directions with regard to tasks or hours worked, you are required by law to carry workers’ compensation insurance.
If you hire a cleaning service that sends employees of its own choosing to your home, you may not be required to purchase this coverage. Likewise, if you pay an individual on a one-time basis to rake your leaves or shovel your snow, you probably are not legally bound to provide workers’ compensation.
In the end, it is best to consult with your insurance agent about what coverage you need to adequately protect yourself and your employees. Be prepared to provide your agent with a full accounting of the people who come to your home in an earning capacity, from the full-time, live-in nanny to the piano teacher who spends one hour a week teaching little Johnny his scales.
Many who are not required by law to carry workers’ compensation will purchase it voluntarily.
Business owners may think they can extend coverage from their business to their home, but they are wrong. Even if you operate your business out of your home, domestic employees must be covered under a separate policy.
Domestic employees may be like family to you, but legally, they are not. You don’t want to find out too late that your gardener who was injured on the job was your employee—and your responsibility—in the eyes of the law.