Workers’ compensation for household employees is required in most states once a nanny, housekeeper, caregiver, or other in-home worker crosses a set threshold of weekly hours or quarterly wages, but roughly a dozen states exempt domestic workers from mandatory coverage entirely. The rule that applies to you depends on where you live, so the first task is figuring out your state’s threshold; the second is deciding whether to carry a policy voluntarily if your state doesn’t require one.
Does the Rule Apply to Your Worker
A household employee is anyone you hire to perform work in or around your private home: nannies, housekeepers, caregivers, private nurses, cooks, gardeners, and personal drivers all qualify. What matters legally is whether the person is an employee or an independent contractor, and that comes down to control. If you set when, where, and how the work gets done, that person is your employee no matter what you call the arrangement. A housekeeper who shows up on your schedule, uses your supplies, and follows your instructions is an employee. A cleaning company that sends different workers, sets its own methods, and serves multiple clients is a contractor.
Courts apply some version of a right-to-control analysis. The more control you exercise, the stronger the employment relationship. Full-time caregivers and live-in workers are almost always employees. Misclassifying someone as a contractor to sidestep insurance and tax obligations can trigger penalties from both your state workers’ compensation board and the IRS, so when in doubt, treat the person as an employee.
State Thresholds Vary Widely
There is no national rule for when a homeowner must carry workers’ comp on a household employee. Each state writes its own test, and the differences are large.
Some states require coverage for any household worker putting in a minimum number of hours per week, with thresholds ranging from 16 to 40 hours. Others use a quarterly or annual wage test, requiring coverage once you pay a domestic worker above a set dollar amount in that period. Still others combine both tests or simply require coverage for anyone you employ.
At the other end, approximately a dozen states fully exempt domestic workers from mandatory workers’ compensation laws. Texas makes workers’ comp optional for all employers, including households. A handful of states set the employee-count threshold at three to five employees, high enough that most single-employee households fall below it.
You can’t resolve this from a general article. Check with your state’s workers’ compensation board or department of labor for the specific rule that applies to your situation. And even in states where coverage isn’t mandatory, you can almost always buy a voluntary policy, which is worth considering seriously because without it you absorb the full financial risk of any on-the-job injury.
What a Policy Covers
A workers’ compensation policy pays for two things when a household employee is hurt on the job: medical treatment and a portion of lost wages. If your housekeeper falls down the stairs carrying laundry, the policy covers emergency care, surgery, rehabilitation, and prescriptions with no out-of-pocket cost to the employee. It also replaces a percentage of regular pay during recovery, though the replacement rate and maximum duration vary by state.
From your side, the real value is the exclusive remedy protection. In most states, when a worker is covered by workers’ comp, their only route to recover money after a workplace injury is through the workers’ comp system. They generally cannot sue you in civil court for negligence. That trade-off is the foundation of the system: the worker gets guaranteed benefits without having to prove fault, and the employer gets protection from potentially unlimited personal injury lawsuits.
What Happens If You Skip Required Coverage
If your state requires coverage and you don’t carry it, you lose the exclusive remedy protection. An injured household worker can sue you directly in civil court for the full range of damages: medical bills, lost income, pain and suffering, and more. A serious injury to a full-time caregiver or nanny could easily produce a judgment above $100,000, and that money comes out of your personal assets.
Beyond civil liability, most states impose separate penalties for failing to carry required coverage. These range from daily fines and stop-work orders to criminal misdemeanor charges in the most serious cases. Some states calculate the penalty as a multiple of the premiums you should have paid. Specific amounts and enforcement mechanisms vary by jurisdiction, but the financial exposure almost always dwarfs the cost of a policy.
Homeowners Insurance Usually Won’t Fill the Gap
Standard homeowners insurance does not reliably cover this risk. Most homeowners policies exclude injuries to residence employees when workers’ compensation is required by state law. Some insurers offer a workers’ compensation endorsement for homeowners policies, but these endorsements are often limited to part-time employees working fewer than 40 hours per week. If your state mandates a standalone workers’ comp policy, an endorsement on your homeowners policy may not satisfy the legal requirement. Verify with both your insurer and your state before assuming your homeowners policy has you covered.
How to Buy a Policy
Getting a workers’ compensation policy for a household employee is simpler than most homeowners expect, though it differs from buying typical insurance.
Get an Employer Identification Number
Before you can buy a policy or handle payroll taxes, you need a Federal Employer Identification Number. You get this by filing Form SS-4 with the IRS, which you can do online and receive the number immediately.1Internal Revenue Service. About Form SS-4, Application for Employer Identification Number (EIN) This nine-digit number identifies your household as an employer for both insurance and tax purposes. You’ll also need the employee’s full legal name and Social Security number for the policy application.
Contact an Insurer or State Fund
In most states you buy workers’ compensation through a private insurance carrier or a licensed agent. Four states require employers to buy coverage exclusively through a state-run fund. Shopping through an independent insurance agent who handles household policies is usually the fastest route, since they can compare carriers and know the specific requirements in your state.
When you apply, the carrier will ask for a detailed job description and your estimated annual gross wages for the employee. If your nanny earns $40,000 a year, that payroll figure drives the premium calculation along with the risk classification for the type of work. Include all cash wages and the fair value of any room and board you provide. Underreporting payroll leads to an audit adjustment and back-charges later.
What a Policy Costs
Annual premiums for a single full-time household employee typically run between roughly $400 and $1,500, depending on the state, the employee’s job duties, and total payroll. States with higher benefit levels and more expensive medical markets charge more. Once you pay the initial premium, the insurer issues a certificate of insurance that proves you’re in compliance. Keep this document accessible; you’ll need the policy number if you ever file a claim.
Reporting Injuries and the Annual Audit
If your household employee is injured on the job, speed matters. Most states require the employee to notify you of the injury within a set period, often around 30 days, though some allow as few as 10. Once you know, report the injury to your insurance carrier promptly. The exact employer-to-insurer reporting deadline varies by state and by policy, but acting within a few days is standard practice and protects your claim from being denied on procedural grounds.
Your insurer will also conduct an annual payroll audit comparing the estimated wages you provided when the policy started against what you actually paid. If you paid more than estimated, expect an additional premium charge. If you paid less, you’ll receive a credit. Accurate payroll records throughout the year prevent surprises during the audit and keep your employee’s benefits from being delayed by paperwork disputes.
Other Obligations Hiring Triggers
Workers’ comp isn’t the whole picture. Hiring someone to work in your home makes you a household employer for federal tax purposes, which triggers Social Security, Medicare, and federal unemployment tax obligations once you pay above certain wage thresholds, all reported on Schedule H with your personal tax return.2Internal Revenue Service. Publication 926 (2026), Household Employer’s Tax Guide Most states charge their own unemployment insurance tax on household payroll, which requires separate registration from workers’ comp. The Fair Labor Standards Act generally applies as well, meaning federal minimum wage and overtime rules reach into your household, with specific treatment for live-in workers and a narrow companionship-services exemption.3U.S. Department of Labor. Fact Sheet 79A – Companionship Services Under the Fair Labor Standards Act You’re also required to verify the worker’s identity and employment authorization by completing Form I-9, with limited exceptions for sporadic or agency-supplied workers.4USCIS. Domestic Workers Each of these runs on its own rules and timelines, separate from your workers’ comp policy but tied to the same hire.