Do You Need Stop Gap Insurance?

Do You Need Stop Gap Insurance?

Stop gap insurance, or stop gap coverage, is a form of employer’s liability insurance. If any part of your business operates in a monopolistic state, you need it yesterday. 

What is a monopolistic state?

In most states, employers choose their own worker’s compensation insurance policy. Most of these policies include employer’s liability insurance, which protects employers from lawsuits by injured employees.

However, in certain states, all employers are required to buy their worker’s comp insurance from a designated state fund. These states, nicknamed “monopolistic” because of the state government’s monopoly on worker’s comp insurance, generally don’t offer employer’s liability insurance as part of their coverage. This leads to the titular gap in coverage, as businesses in these states lack the protection against employee lawsuits that most businesses take for granted. 

Which states are monopolistic?

Only the following four states are considered monopolistic:

  • Washington
  • Ohio
  • Wyoming
  • North Dakota

A business operating in any of the states listed above needs to purchase stop gap insurance. Large or decentralized businesses with multiple locations should buy stop gap coverage for branches located in monopolistic states. 

United States territories such as Puerto Rico and the Virgin Islands also require employers to purchase workers’ compensation from monopolistic state funds. Any business operating in a territory should consider buying stop gap insurance.