Here is the short answer: While only about half the states in our country have compulsory coverage laws, you should have workers’ compensation insurance for your domestic employees whether it is required or not. Ostensibly, the insurance protects the workers, guaranteeing that employees will receive income if they are injured and unable to work. But it also protects you, the employer, by limiting your liability.

Simply put, if a domestic employee collects workers’ compensation benefits after being injured, that worker cannot turn around and sue you for damages, in most cases. This is called “exclusive remedy,” and you qualify for it by paying what is often a modest premium for workers’ compensation insurance. That premium is computed based on what you pay the employee or by the number of employees you have, depending on what state the employee works in; the higher the compensation or the more workers employed, the higher the premium. As an example, our firm wrote a policy with an annual premium of $862 for a client in Connecticut whose domestic employee earns $34,000 per year.

But what exactly is a domestic employee? As defined by the IRS, he/ she is someone hired to do household work, and that worker is your employee. Specifically, the IRS lists babysitters, caretakers, cleaning people, domestic workers, drivers, health aides, housekeepers, maids, nannies, private nurses and yard workers. However, the definition of a domestic employee varies widely among states (see sidebar).

So how do you make certain you purchase workers’ compensation coverage that meets state requirements? In most states you can obtain coverage through the state’s Department of Labor, but the process can be lengthy and confusing; having an agent to help you unravel the subtleties involved will save time and possibly frustration. The bad news is that your choice of personal insurance agents who have experience and expertise in this area is fairly limited because many do not understand workers’ compensation coverage.

Our firm does deal in workers’ compensation for domestics because we consider it part of a total risk package. We also consider it our responsibility, or that of any agent with whom you work, to thoroughly review all workers in your employ, what they do, their compensation and their risk of injury on the job in order to compute the level of coverage you need, including liability.

One final reason why obtaining workers’ compensation insurance for domestics is vital: Despite the caveat that an employee who collects workers’ comp cannot sue you, there is something called “absolute liability,” meaning that if your domestic employee is injured during the course of duties, you are liable for damages—even if the injury is completely the worker’s fault.