Workers’ compensation insurance helped cover medical costs and missed pay for staff members hurt at work. It also offers protection against lawsuits.
Most states require businesses to carry this insurance for their employees. Premiums are typically based on payroll, which includes salaries, wages, bonuses, and overtime. However, domestic servants and sole proprietors are usually excluded from coverage.
Coverage for Injuries
Most states mandate workers compensation insurance policy for companies with one or more employees. Employees who sustain work-related injuries are covered under this insurance for medical costs and a percentage of missed pay. From state to state, the cost varies but is typically determined by payroll and claim history. Business owners should understand how their premiums are determined and their coverage options.
Many small business owners exclude themselves from their policy to save on costs. However, if an injury happens, this dangerous action could lead to disallowed claims. In addition, if the damage is not reported within the required period, it could lead to fines or even jail time.
Workers’ comp can also pay legal fees if an employee sues the business over a workplace injury. To keep employees safe and lower the frequency of occurrences that result in injuries and legal action, you should, as a business owner, promote a culture of safety in the workplace.
It’s important to note that workers’ compensation won’t cover all work-related injuries. For instance, it won’t pay for damages when driving to or from work, during a break, or when intoxicated or using illicit drugs. Suppose you need to determine whether workers’ compensation will cover an injury.
In that case, it’s best to consult with an attorney for legal advice or a licensed insurance agent or broker for information about your particular situation and state laws.
Coverage for Lost Wages
The workers’ compensation system was created to ensure that workers who sustain injuries receive financial assistance. Medical bills could be so expensive that a small business owner might have to close down without coverage. For this reason, even if they believe their workplace is secure, most firms are legally obligated to have workers’ compensation insurance.
A few exceptions to the requirement that all companies carry a workers’ comp policy are working partners who agree to share the profits, casual servants employed in your home, domestic workers, and sole proprietors with no employees (who can choose to include themselves in the policy). However, most states require that all owners be covered. Rules vary by state, so check out State-by-State Guide to learn more.
As a business owner, you can save money on your premium by classifying your employees correctly. Employees at low risk of injury, like those working desk jobs, cost less to insure. You can also save money by choosing a pay-as-you-go workers’ comp policy. This lets you pay a lower upfront premium and then make payments based on your actual payroll each month instead of estimated.
A workers’ comp policy will also cover legal expenses if an employee sues for a workplace injury. While a successful lawsuit against a business is rare, the costs of defending against one can be prohibitive without coverage.
Coverage for Disability
If you suffer a workplace injury or illness that keeps you out of work, workers’ compensation insurance may help cover medical bills and lost wages. It can also provide disability benefits to assist you in resuming your career when you’re ready to return to the job market.
The laws governing workers’ comp vary by state, so check with your local business law office or a trusted advisor for the latest rules in your area. For example, some states won’t cover psychological injuries unless they stem from physical damage at work. In contrast, others limit the time you can receive disability benefits to a specific period.
In addition, the premiums for a workers’ compensation policy are typically based on employee class codes that determine how risky an employee is for a particular type of job. As a result, the higher the class code, the more expensive the worker’s comp premium.
To get a quote for your small business, talk with an agent. They can help you find a policy that meets your state’s requirements while offering competitive prices. Then, they can integrate with your payroll provider to make workers’ comp premium payments more manageable by splitting the cost between each pay cycle and avoiding hefty upfront fees or billing charges.
Coverage for Legal Fees
In addition to medical and wage benefits, workers’ compensation insurance typically covers legal fees for the employer in cases where an employee sues over a workplace injury. Even small businesses face lawsuits occasionally, and business owners must have coverage for these situations.
Some small businesses skip getting workers’ compensation insurance because they assume they have no issues. Unfortunately, ignoring this coverage can come with a hefty price tag if an employee gets injured while working for your company.
Most states require that you get workers’ comp for employees, and this insurance will also cover your legal costs if an employee sues over a workplace incident or injury. This is one of the most significant reasons why it’s so crucial for small business owners to carry this coverage.
As a business owner, deciding to exclude yourself from your workers’ compensation policy is complicated. The most common reason to exclude yourself is that you can save money on the premiums. However, there are better courses of action than this.
For example, if you are injured on the job, your health insurance will not pay for your injuries like a workers’ comp policy. It’s a good idea to weigh the costs and benefits of this type of coverage before making your final decision.
