Michigan workers' compensation insurance

A person who owns a business alone is a sole proprietor, which means the business isn't a partnership, limited liability company (LLC), or corporation. Since a sole proprietor isn't employed by another person, they're not required to have workers’ compensation insurance. However, if that person employs other people, workers’ comp coverage would be required.

Even when workers' comp isn't required, it's a good idea to buy this coverage. Your health insurance might deny a claim for a work-related injury, leaving you to pay expensive medical bills. Workers' comp also provides part of the wages you miss while recovering from a work injury, which could save your business if you're unable to work for an extended time.

If a private business regularly employs three or more people at one time, part-time employees are entitled to workers’ compensation.

If a business is a partnership, LLC, or small corporation, employees must be covered by workers’ comp insurance. Michigan uses the IRS-20 Factor Test for determining whether workers are classified as employees who need workers' comp or independent contractors.

Michigan law indicates in some cases, partners and corporate officers who are also shareholders of small companies might be exempt. If all of a company’s employees are also partners or owners in a small business, it's possible to obtain an exemption certificate from the Insurance Compliance Division.

Additionally, here's what your workers' comp policy won't cover:

• Injuries caused by intoxication, drugs, or company policy violations
• Injuries claimed after a firing or layoff
• Wages for a replacement worker
• Occupational Safety and Health Administration (OSHA) fines

Insurance providers use a specific formula for calculating workers' comp premiums:

To save money on workers' comp insurance, it's important to make sure you classify your employees correctly. Employees with desk jobs or other jobs with a low risk of injury cost less to insure. This also helps you avoid misclassification fines.

In some cases, small business owners can choose to buy pay-as-you-go workers' compensation. This type of workers' comp policy has a low upfront premium, and lets you make payments based on your actual payroll instead of an estimated payroll. It's useful for businesses that hire seasonal help or have fluctuating numbers of employees.

A ghost policy is a cheap option in some states, including Michigan. A ghost policy is a workers' comp policy in name only. It provides no protection or medical benefits, but can fulfill contractual requirements for a workers' comp certificate at a reduced price.

Finally, a documented safety program can help lower workers' comp costs. A safer workplace means fewer accidents, which helps keep your premium low.

The Workers' Disability Compensation Agency (WDCA) enforces the Workers’ Disability Compensation Act.

If an employer is not providing the correct insurance coverage required by the Michigan Workers’ Disability Compensation Act, the WDCA can petition the court to seek an order that prohibits the company from employing anyone else until the right coverage is secured.

The employer could also be subject to a fine of $1,000 or imprisonment of between 30 days and six months. Every day that the employer is uninsured is a separate offense. The business could also face legal action from the employee in civil court.

If an employee dies in an on-the-job accident, family members could be eligible for workers’ compensation death benefits. The State of Michigan allows beneficiaries to include:

• Spouse
• Children or grandchildren
• Parents or grandparents
• Siblings
• Other family members

Anyone who falls into one of these categories can be awarded benefits if that person is determined to be a dependent of the deceased worker. Children are presumed to be dependents if they are under 16 years old, or if they are 16 or older but physically or mentally unable to earn a living.

In addition, to receive death benefits, a child must have been living with the worker at the time of death or with a former spouse. For any other person to qualify, they would need to prove complete or partial dependency on the worker’s earnings at the time of death.

All dependents combined can receive 80% of the worker’s after-tax state average weekly wage, following deduction of federal and state income, Social Security, and Medicare taxes.

There are maximum and minimum amounts for weekly benefits under workers’ compensation death benefits. Michigan adjusts these rates each year. Wholly dependent family members would share benefits equally, and the partially dependent individuals would become eligible if there are no whole dependents.

Dependents are able to receive benefits for up to 500 weeks, or until a beneficiary turns 21 years old. A spouse’s benefits end when that person is remarried, but the children’s benefits would continue until age 18 (or 16 if the child has been self-supporting for six months).

Workers’ comp benefits in Michigan include funeral expenses up to $6,000.

Most workers who are injured on the job are able to pursue a workers’ comp settlement. Michigan closes a worker’s rights to additional benefits once a workers' compensation claim is settled, with a few exceptions.

If the worker has injuries that require ongoing medical treatment, the insurance company will occasionally continue to pay for that treatment. Usually, however, a claim will result in either a lump sum or structured settlement.

Lump sum settlements: When a lump sum settlement is reached, it means that the insurance company will make a single payment that resolves the entire workers' comp claim. Sometimes, the insurer will make a voluntary payment, which means that it will pay the worker a certain amount of payments, but the worker could still demand additional benefits in the future.

Structured settlements: A structured settlement would exist in lieu of a lump sum. Instead of a single payment by the insurance company, it will make periodic payments according to a set schedule (monthly, annually, etc.). This is still a settlement that closes the case to future benefits, even though it is paid over the course of time.

To close workers’ compensation settlements in Michigan, any settlement needs to be heard before the Michigan Workers’ Disability Compensation Agency.

An injured worker must give notice to the employer within 90 days of the injury, either verbally or in writing. It’s then the worker’s responsibility to file a claim within the workers’ compensation statute of limitations. State law requires that a claim is made within two years of the date of injury.

If you are ready to buy a workers' compensation policy, start a free application with Insureon to compare quotes from top-rated insurance carriers. A licensed insurance agent will help answer your questions and explain your coverage options. Once you find the right policy, you can usually begin coverage and get your certificate of insurance in less than 24 hours.