Kentucky workers' compensation insurance

Kentucky’s workers’ compensation laws require virtually all public and private-sector employers to provide coverage for employees. Employers that are not required to provide workers’ comp insurance include:

• Agricultural businesses
• A person or entity employing domestic workers in a private home (with less than two full-time employees)
• Employers with workers covered under federal workers’ compensation programs (e.g., railroad and maritime workers)
• Certain religious organizations
• Any homeowner employing a residential maintenance or repair person for up to 20 consecutive workdays

However, employees in all of the above categories may voluntarily participate in their organization’s workers’ comp program.

Conversely, eligible employees may elect to reject workers’ comp protection by signing a Form 4 Waiver (“Employee’s Notice of Rejection of Workers’ Compensation Act”). They must file this form with the Kentucky Department of Workers’ Claims. It will remain effective until withdrawn.

As in most states, determining who should be treated as an independent contractor vs. an employee can be a difficult issue.

The State of Kentucky workers’ comp department looks at four main factors to determine independent contractor status:

• The type of work the contractor is doing
• How much control the employer has over the details of the work being performed
• The professional skills of the independent contractor
• The intentions of both parties

If state regulators rule that your independent contractors are misclassified and should be considered employees, you will be required to provide workers’ compensation insurance.

In general, you must include yourself in your company’s workers’ comp insurance, but there are exceptions:

• If you’re a sole proprietor. However, if you have employees, you must provide workers’ compensation for them.
• If you’re a partner in the firm.
• If you’re a qualified member of an LLC (you participate in making decisions and share in profits and losses).

All of the above individuals can elect to participate to receive the benefits of a workers’ compensation policy. It's usually a good idea, as medical bills are expensive, and your health insurance company can deny an injury claim if it's related to work.

To save money on workers' comp, 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 estimated payroll. It's useful for businesses that hire seasonal help or have fluctuating numbers of employees.

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

When an employee suffers a workplace injury or develops an occupational disease (such as black lung disease), workers' compensation covers the cost of the employee's medical treatment. It also provides disability benefits while the employee is recovering and unable to work.

Policies usually include employer's liability insurance, which can help cover legal expenses if an employee blames their employer for an injury. However, the exclusive remedy provision in most workers' comp policies prohibits an employee from suing their employer if they accept workers' comp benefits.

Workers' compensation benefits for injured workers include:

• Pay for time off work during recovery (usually two-thirds of the employee's average weekly salary)
• Medical expenses (emergency treatment, prescriptions, physical therapy, and other medical care)
• Temporary total disability benefits (TTD)
• Permanent partial disability benefits
• Permanent total disability benefits
• Death benefits

The amount that the worker receives for disability benefits usually depends on the impairment rating established by their doctor. TTD payments continue until the employee returns to work or reaches maximum medical improvement.

Kentucky business owners can compare quotes and purchase a policy from private insurance companies. Insureon offers this service with its online insurance marketplace.

If they’re unable to qualify, they can buy it from the state’s assigned risk residual market, the Kentucky Employers’ Mutual Insurance Authority, a competitive state fund. This is the insurance coverage of last resort for employers that are unable to qualify for standard coverage due to their high-risk status.

Kentucky employers who qualify can self-insure their workers’ compensation claims. This means they’ll pay for their own workers’ comp medical, rehab, and death benefits rather than an insurance company. Because self-insured employers are responsible for all workers’ comp costs, the state has a formal process for reviewing an employer's ability to self-insure their workers’ comp claims.

To apply for self-insurance status, firms must submit their three most recent certified financial statements, along with a completed Form SI-02, “Employers Application for Permission to Carry His Own Risk Without Insurance.” The application must be filed at least two months prior to the desired plan inception date.

If you operate your business without workers’ compensation insurance in Kentucky, you may be fined $1,000 per employee, per day in which you fail to provide mandated coverage. Other potential penalties include:

• Being ordered to close your business until you come into compliance with the state’s workers’ comp requirement
• Criminal penalties including fines, jail time, or both

If an employee dies as a result of a work-related injury or illness, the worker’s eligible family members may receive death benefits.

A person’s relationship to the deceased worker and the degree of financial dependence on that person are factors in determining eligibility.

In Kentucky, the following individuals are assumed to be dependent financially on the employee:

• A surviving spouse
• Children younger than 18 who live at home with the spouse
• Children younger than 22 who are enrolled in an accredited higher education program
• Adult children who are mentally or physically unable to support themselves or who depended on the deceased worker for financial support in the past

In addition, family members who can prove they depended on the deceased worker in the past may be eligible for death benefits. This includes:

• Parents
• Siblings
• Grandparents
• Grandchildren

Eligible family members can receive weekly death benefits amounting to no more than 75% of the deceased employee’s average weekly wages. This amount can’t exceed the average weekly wage across the state.

For partially dependent survivors, the weekly benefit will be based on how much the person provided for each dependent.

Whether wholly or partially dependent, survivors can receive benefits for no longer than 500 weeks.

In Kentucky, eligible family members can also receive a lump-sum payment for burial and other expenses as long as the worker died no longer than four years from the date of the injury. The lump sum is calculated on the basis of the state’s average weekly wage.

A workers’ compensation settlement is an agreement between the injured employee, employer, and insurer that will close out a workers’ compensation claim. This benefits both the employee and the employer.

Settlements in Kentucky usually take the form of a lump-sum payment. However, some are paid over a specified time.

Kentucky is different from many other states in that its workers’ comp settlements don’t necessarily remove the possibility of receiving future payments. The state allows an injured employee’s claim to be reopened if the person’s condition deteriorates within four years.

All settlements are subject to the approval of the Kentucky Department of Workers’ Claims. To finalize a settlement, the employee must file a special form based on the nature of the injury or illness that precipitated the claim. Contact the Kentucky Department of Workers’ Claims to request the appropriate form.

A workers’ comp settlement in Kentucky may be reached either with or without a formal hearing.

In Kentucky, the statute of limitations for workers’ comp claims is within two years of the date of injury or of the last voluntary payment of disability income benefits, whichever comes later.

If you are ready to explore workers’ comp options for your Kentucky business, start a free online application today to compare quotes from top-rated insurance carriers.