When a sole proprietor in Iowa with employees purchases a company workers compensation policy, is the proprietor automatically covered? Or do they have to elect coverage for themselves?
Q: When a sole proprietor in Iowa with employees purchases a company workers compensation policy, is the proprietor automatically covered? Or do they have to elect coverage for themselves?
Response 1: Prior to about 2015, sole proprietors and partners were specifically exempt from workers comp but could elect in the coverage.
Sometime after 2015 that changed slightly. They are still exempt if they have no employees but if they have employees and purchase a workers comp policy, they are presumed to include themselves and can elect out. They must also select an amount of weekly benefits between the minimum and maximum, which is calculated every year by National Council of Compensation Insurance (NCCI) and published in the NCCI Basic Manual Iowa pages.
There are endorsements that need to be added to the policy and forms that need to be filed with the state. You can find the answers to your questions on the Iowa Workforce Development website, contacting the Iowa Insurance Department or contacting your carriers. Also, I believe the Independent Insurance Agents of Iowa has up-to-date information on this subject.
Response 2: That is a state-specific question. The answer differs by state. Check your state law and if still not sure, contact the regulatory authority that manages workers comp in the state.
Response 4: Sole proprietors are not usually automatically covered. They must elect coverage. This should be indicated on the application. I urge you to take a class to learn more about the products you are selling.
Response 5: Sole proprietors themselves typically are exempt from workers comp laws but must carry workers comp for their employees. In California, a roofer must carry workers comp even if the roofer declares no employees.
Typically, workers comp insurers exclude the sole proprietor owner unless the owner opts into coverage and is approved by the underwriters. Some insurers do not offer workers comp coverage to sole proprietors—one excuse being they are concerned that they would be giving 24/7 coverage. It may or may not be a silly excuse dependent on the risk.
Whether or not an opt-out signature is required would depend on the insurer and possibly state laws. You would need to review the laws of the states that concern you and your clients.
This question was originally submitted by an agent through the Big “I” Virtual University’s (VU) Ask an Expert Service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.