Workers' Comp and Liability When You're the Employer

Why there isn't one national answer

Workers' compensation for a household employee is governed by state law, not federal law, so whether it's required for a privately hired caregiver, and at what point, differs from state to state. Some states require coverage for a single household employee working any amount of hours; others attach the requirement only once pay or hours cross a set threshold; a few carve out household employment separately from other small-business rules entirely.

That variation is exactly why a page like this one can describe the shape of the question but not the number that answers it for your address. The reliable move is to call your state's workers' compensation agency, or the state department of labor if that office handles it, and ask specifically about household or domestic employees, not about small businesses in general. The terminology matters: a household employer is often a distinct category with its own rules, separate from running a business.

The question of workers comp when hiring privately comes up so often precisely because the alternative hides it: agency workers comp is typically already folded into what an agency charges, so the obligation only becomes personal once a family hires and pays someone directly.

The federal question is separate: are you a household employer for taxes?

Workers' compensation is a state insurance requirement. Whether you owe federal payroll taxes on a caregiver's pay is a completely different determination, made by the IRS, and clearing one says nothing about the other. A family can owe federal household-employment taxes and still have no state workers' comp obligation, or the reverse, depending on the state.

The federal side turns on control: someone doing household work in and around your home, whose tasks and methods you direct, is generally your household employee, with Social Security and Medicare taxes owed on cash wages at or above the annual threshold, reported on Schedule H with the return you already file 1Ref 1Internal Revenue Service (2025).Topic no. 756, Employment taxes for household employees.That a privately hired caregiver is generally a household employee for federal tax purposes, with Social Security, Medicare, and Schedule H obligations attaching at the annual wage threshold, as a separate determination from state workers' comp requirements..

Passing the federal household-employer test and satisfying your state's workers' comp requirement are two different checklists. Neither one answers the other.

Families who work through the federal paperwork sometimes assume they've covered the insurance question too, because both involve the word employer. They haven't. The state agency is the only one that can say whether workers' comp applies to your specific arrangement.

Becoming a household employer for tax purposes can also mean applying for an employer EIN, a separate piece of paperwork from whatever your state requires for workers' comp, and one more reason the two systems are worth tracking on separate checklists rather than one combined one. Paying under the table sidesteps both of these questions at once, but it doesn't make the underlying employment relationship disappear; it only removes the paper trail that would have supported a claim if the caregiver were ever hurt on the job.

What a homeowners policy may or may not cover

Whether your homeowners or renters policy extends to an injury a paid caregiver suffers in your home is a question to put to your insurer directly, in writing, before the caregiver's first shift, not a fact to assume either way. Policies differ, insurers classify a paid household worker differently from a guest or a contractor, and the honest answer for your specific policy will not come from a general description of how policies typically work.

Ask your agent three things by name: whether the policy treats a paid, regularly scheduled household worker as covered for injury, whether that changes if the person is live-in versus daily, and whether an umbrella or a separate workers' comp policy is the carrier's own recommendation for your situation. Get the answer back in writing, or at minimum in an email you can find again later, rather than relying on a phone call nobody wrote down.

Caregiver injury liability is exactly the scenario a standard homeowners policy was often not written with in mind, which is why asking beats assuming here more than almost anywhere else in this arrangement.

What federal wage rules add on top

Even where workers' comp isn't the deciding factor, hiring a caregiver privately brings a separate layer of federal wage-and-hour obligations that families researching workers' comp often stumble into at the same time. The Fair Labor Standards Act's companionship-services exemption is the center of it: it defines companionship as fellowship, protection, and care that is limited in extent, and its minimum-wage and overtime exemption applies only to a companion employed directly by the household, not by a third-party agency 2Ref 2U.S. Department of Labor, Wage and Hour Division (2016).Fact Sheet #79A: Companionship Services Under the Fair Labor Standards Act (FLSA).The FLSA definition of companionship services as fellowship, protection, and limited care, and that the minimum-wage and overtime exemption applies only to companions employed directly by a household rather than by a third-party agency..

That exemption narrows fast once the work moves toward hands-on personal care, bathing, dressing, transfers, medication reminders, rather than company and supervision alone. Separately, federal guidance addresses how sleep time, meal periods, and travel time are counted and paid for live-in domestic workers specifically 3Ref 3U.S. Department of Labor, Wage and Hour Division (2025).Domestic Service Final Rule Frequently Asked Questions (FAQs).How federal guidance addresses sleep time, meal periods, and travel time for live-in domestic workers, relevant to families hiring a live-in or overnight caregiver privately., which matters most in overnight or live-in arrangements where the line between being present and being on the clock is genuinely unclear.

None of this is the workers' comp answer. It is the reason a family that has only researched insurance sometimes discovers, later, that its pay structure had its own separate problem.

A number of states have gone further and passed their own domestic workers bill of rights, layering protections such as written agreements, rest breaks, or advance notice on top of the federal floor. Where one exists, it is one more state-specific document worth reading before assuming the federal rules are the whole picture.

Wages vary by state, and so does the exposure

Part of why there's no single workers' comp number is that the underlying pay a caregiver earns, which premiums and thresholds are often built around, varies by state in the first place. National wage data for home health and personal care aides shows real state-by-state spread in both hourly pay and employment counts 4Ref 4U.S. Bureau of Labor Statistics (2025).Occupational Employment and Wage Statistics: 31-1120 Home Health and Personal Care Aides.State-by-state variation in home health and personal care aide wages and employment counts, used to illustrate why payroll-based thresholds and exposure vary by state., and a family's actual payroll, which some states use to set whether a workers' comp threshold is crossed, follows that same variation.

The national median cost of in-home care ran to roughly $75,500 to $77,800 a year in 2024, depending on the type of service 5Ref 5Genworth Financial / CareScout (2025).Genworth and CareScout Release Cost of Care Survey Results for 2024.2024 national median consumer cost of in-home care (homemaker services $75,504/year, home health aide $77,792/year), used to size the cost of workers' comp coverage against the cost of the care itself.. Set against that figure, the cost of a workers' comp policy, where one applies, is a small fraction of what the care itself already costs, which is worth knowing before deciding it isn't worth asking about.

If a state Medicaid program is the one paying the caregiver

Some of this shifts if a caregiver is being paid through a state Medicaid self-directed, or participant-directed, program rather than paid privately out of pocket. Those programs let an eligible beneficiary manage a budget and hire, train, and manage their own caregiver, including a family member in some states 6Ref 6Centers for Medicare & Medicaid Services (2025).Self-Directed Services.That Medicaid self-directed programs let a beneficiary manage a budget and act as employer of record for their own hired caregiver, including a family member in some states, which can change who is responsible for arranging workers' comp., and the state program itself, not the family alone, sets the employment rules that go with that arrangement.

That does not make the workers' comp question disappear, but it does mean the first call belongs to the program administrator rather than to a state agency cold: ask specifically whether the program's structure already accounts for workers' comp, or whether the family, as the employer of record, still has to arrange it separately.

Getting a clear answer before the first shift

Three calls, made before any money changes hands, settle more than a week of searching would: your state workers' compensation agency, asked specifically about household or domestic employees; your homeowners or renters insurer, asked specifically about paid household worker injuries, in writing; and, if a state program is involved, that program's administrator, asked what it already covers.

Write down who you spoke to and what they said, with a date. If a caregiver injured at home ever becomes more than a hypothetical, that record, not your memory of a phone call, is what everyone will be working from.