Employing someone in your home is one of the few things a household can do that changes its legal status. A family that hires a regular nanny, housekeeper, caregiver or gardener may become an employer, with the obligations that carries. Most people arrive at this without noticing, which is why the insurance question tends to surface after an injury rather than before one.
Employee or contractor
The distinction drives everything that follows, and it is decided by the facts of the arrangement rather than by what either party calls it.
Generally treated as your employee: someone whose work you direct, whose hours and duties you set, who uses your equipment and works at your home on a regular basis. A nanny is the standard example. Regular housekeepers, home health aides, personal caregivers and household managers often fall here too.
Generally treated as an independent contractor: a licensed tradesperson who works for multiple clients, brings their own tools, sets their own methods and carries their own insurance. An electrician, a plumber, a roofer, most landscaping companies.
The ambiguous middle is real. A cleaner who comes weekly, works alone, uses your supplies and follows your instructions may look more like an employee than a contractor even if you pay them casually. Classification rules are set by state law and by tax authorities, they differ, and getting it wrong has consequences beyond insurance. This is a question for an employment attorney or a household payroll service, not for an insurance summary.
What a homeowners policy does
Standard policies address a category usually called a residence employee, and they handle that category in two places.
Personal liability may respond if a residence employee is injured in the course of their work and you are legally liable, and medical payments to others may pay medical expenses for a residence employee's injury on a no-fault basis, up to a small limit.
Here is the critical condition. Those provisions typically exclude an employee who is required to be covered under a workers compensation law. In other words, the homeowners policy responds where workers compensation is not required, and steps aside where it is.
That is the interaction to understand: it is not a choice between two coverages, it is a handoff decided by your state's workers compensation statute. If your state requires coverage for your situation and you do not have it, the homeowners policy will generally not fill the gap.
The general liability picture is in home liability: pools, dogs, trampolines and guests.
Workers compensation for household employers
A number of states require household employers to carry workers compensation, and the thresholds are the part that varies most. Common triggers include hours worked per week, days worked per week, number of employees, and total wages paid in a quarter. Some states exclude workers who are close relatives. Some distinguish full-time from occasional help.
A few states address the household situation through the homeowners policy directly. California requires insurers to make a workers compensation endorsement available to homeowners policyholders for household employees. New Jersey permits a workers compensation rider on a homeowners policy. Where an endorsement is available, it may be limited by hours worked, so read what it actually covers.
Where to buy it also varies. A small number of states operate monopolistic funds where coverage must be purchased from the state; elsewhere a state fund typically competes with private insurers, and your homeowners insurer is often the easiest first call.
Whether your state requires it, at what threshold, and where you can buy it are questions for your state's workers compensation agency or Department of Insurance. These rules change, they are specific, and a general summary is not a safe basis for a decision.
Why it matters more than it looks
Workers compensation is not only a mandate. It is the mechanism that limits your exposure.
Where it applies, an employee who accepts benefits generally gives up the right to sue the employer over the injury, regardless of fault. That trade is the entire design of the system. An uninsured household employer keeps the liability without the protection: medical costs and lost wages become a personal obligation, and the injured person retains the right to bring a claim.
On top of that, states impose penalties for failing to carry required coverage, and in some they are substantial and can include criminal exposure.
An injury to someone working in your home is not an exotic scenario. Falls from ladders and stairs, lifting injuries among caregivers, cuts, burns and dog bites are ordinary occurrences in ordinary houses.
Contractors are a different exposure
For genuine independent contractors you do not need workers compensation, but you do need to check theirs.
An uninsured contractor's injured employee may look to the property owner, and depending on state law an uninsured subcontractor can be treated as the hiring party's employee for workers compensation purposes. That is the exposure to close.
- Ask for certificates of insurance showing general liability and workers compensation, issued by the contractor's insurer or agent rather than handed to you by the contractor.
- Verify the license with the state licensing board.
- Confirm the coverage is current on the dates the work is happening.
- Watch subcontractors, since the general contractor's certificate says nothing about the crew they bring.
This is part of the wider set of issues covered in renovating a home and insuring a home under construction.
Beyond workers compensation
Employing someone at home raises exposures a homeowners policy handles partially or not at all.
- Employment practices claims, including wrongful termination, discrimination and harassment allegations. Standard homeowners liability generally does not cover these. Some personal excess policies offer limited employment practices coverage, and standalone options exist.
- Auto exposure. If an employee drives their own car on your errands, or drives your car, both liability pictures change. See who is covered to drive your car.
- Theft by a household employee, which standard forms generally exclude from theft coverage. See after a burglary.
- Higher liability limits. An employee injury claim can exceed a standard liability limit quickly. An umbrella policy sits above the underlying limits, and coordinating it with a workers compensation policy is worth discussing. See umbrella insurance explained.
- Payroll, tax and wage law obligations, which are separate from insurance entirely and are where most household employers actually get into trouble.
A short checklist
- Determine whether the person is an employee, using your state's rules rather than intuition.
- Check your state's workers compensation threshold for household employers.
- Ask your homeowners insurer whether an endorsement is available and what it covers, including any hours limit.
- Read the residence employee provisions in your own policy so you know where the handoff sits.
- Review your liability limits and whether an umbrella is warranted.
- Handle contractors separately, with certificates verified at source.
- Get professional advice on payroll, tax and classification. This is the part insurance does not solve.
Definitions of residence employee, how liability and medical payments respond, workers compensation thresholds and exemptions, endorsement availability and where coverage may be purchased all vary by insurer, by policy and by state, and the policy documents and state law control. For your own situation, speak with a licensed agent, an employment attorney, your state's workers compensation agency or your state's Department of Insurance. You can also request home insurance quotes and get connected with licensed providers in your area.