Workers’ compensation insurance
Workers' compensation insurance
Workers’ comp insurance covers medical costs for work injuries and illnesses. Almost every state requires employers to carry this policy.
Why do you need workers' compensation insurance?
Workers' compensation insurance is a safety net that helps your business and your employees recover from work injuries and illness. This includes everything from a minor injury to a broken bone from a fall.
While workers' comp laws differ by state, this policy is generally required as soon as a small business hires their first employee (or a certain number of employees), including part-time employees.
Workers' compensation benefits will take care of your injured workers by paying for their medical expenses, including medications, physical therapy, and doctor visits. And if the employee sues, it’ll cover those costs too.
If you don't purchase workers' compensation, you can find yourself paying out-of-pocket for costly medical bills and legal fees, which can financially devastate your small business. In addition, most states impose pricey penalty fees for noncompliance.
A workers’ compensation policy will cover any reasonable claim, regardless of who caused the accident or injury.
Small businesses find workers' comp necessary for three reasons:
- Required by state law
- Pays for medical bills and partial wages when you or an employee is injured
- Provides financial protection against employee lawsuits over a work injury
What does workers' compensation insurance cover?
Workers’ comp covers any on-the-job injuries, both in your office or anywhere else – including at employees’ homes. This policy ensures that you and injured employees get full medical care and return to work better than ever.
More specifically, workers' comp insurance provides coverage for:
Emergency response to work accidents
If an employee at your small business is injured on the job, such as a window cleaner falling from a ladder and breaking their arm, workers' comp can cover the cost of immediate medical expenses, including ambulance rides and emergency room visits.
Ongoing treatment for work injuries
Workers' compensation insurance can cover ongoing medical bills related to a work injury or occupational illness, such as long-term medical treatments.
Partial wages while an employee recovers
Sometimes a serious work-related injury or illness prevents an employee from doing their job. Workers' compensation insurance can pay the employee part of the wages they miss due to their inability to work.
Lawsuits blaming the employer for an injury
The employer's liability insurance included in most workers' comp policies protects the owners of small businesses from lawsuits over work injuries or illnesses. This includes legal costs and settlements.
Many small companies don’t have the funds to weather an employee lawsuit. This is why a workers’ comp policy is a good investment even if your state doesn’t require coverage.
How much does workers’ compensation insurance cost?
Workers' compensation policyholders pay on average $45 per month, or $542 a year, for coverage. Your exact cost may be more or less depending on your risks.
The cost of workers' compensation insurance is based on several factors, including:
- How many employees you have
- How much insurance coverage you need
- Your business location
- Your claims history
- Your policy limits
Are businesses required by law to carry workers’ comp insurance?
Most state laws require business owners to purchase workers’ comp as soon as they hire their first employee. Other states require coverage when a business has a certain number of employees. Some states allow businesses to self-insure or have other exemptions. Others give approval for small businesses to pay for workers' compensation claims out-of-pocket.
In Florida, for example, you’ll be required to carry this policy when you hire four or more employees. Texas and South Dakota are the only states that don't require this coverage.
Make sure you know both the workers’ compensation laws in your state and your employees’ states. You can find this information on your state's department of labor or division of workers' compensation websites.
If you don’t comply with state workers’ comp requirements, you could face fines or even jail time.
Find workers' comp requirements in your state
Do sole proprietors and independent contractors need workers’ compensation insurance?
Given the high cost of health care, sole proprietors, contractors, and subcontractors should consider carrying workers' comp coverage.
The work you do every day like typing, pointing and clicking, and even staring at your monitors can cause health issues. Conditions like carpal tunnel syndrome, tendinitis, or chronic headaches can develop over months or years in a workplace environment. In addition, you're always at risk for unpredictable injuries from falls or slips.
Your health insurance might not cover injuries that are related to work, which would leave you responsible for hospital bills and related medical expenses. On top of that, you would miss out on wage replacement benefits that can help keep your business running while you recover.
Workers' comp provides this key coverage. Learn more about workers' compensation insurance for independent contractors and the self-employed.
What isn't covered by workers' compensation insurance?
A workers' compensation policy protects your small business financially from workplace injuries and illnesses, but it doesn't cover all vulnerabilities associated with running a business.
To fully safeguard your small business, you should consider business insurance policies to protect against these common risks:
Injuries or illnesses unrelated to work
For injuries or illnesses that aren’t related to work, health insurance can help pay for medical expenses, and disability insurance can help cover lost income.
Learn the differences between workers’ comp, health, and disability insurance.
Employee discrimination lawsuits
Employment practices liability insurance (EPLI) covers costs when an employee alleges harassment, discrimination, wrongful termination, or another violation of worker rights.
Client, customer, or visitor injuries
General liability insurance pays for medical expenses and legal costs if someone other than an employee suffers an injury at your workplace.
Even though general liability isn't mandated by law, many clients and landlords may require this policy in order for you to secure a contract or lease.
Business property damage
Commercial property insurance protects a company’s building and its contents from damage or loss.
You can combine your general liability insurance with commercial property coverage in a bundle called business owner's policy (BOP). A BOP is usually less expensive than buying these two policies separately.
Employee grievances against board members
Directors and officers insurance (D&O) protects a small business's board members and officers from employee lawsuits over grievances, including allegations of harassment or mismanaged funds.
A D&O insurance policy covers both legal costs and any resulting settlements.
Other common questions about workers' compensation insurance
How do you get a certificate of insurance?
TechInsurance is a trusted insurance expert for all small business owners, including contractors and limited liability companies (LLCs), with extensive knowledge of the IT sector. Our licensed insurance agents are available to answer your questions and help you find the coverage that's right for your business needs.
With TechInsurance, you can easily download a certificate of liability insurance for your small business, often on the same day you buy workers' compensation coverage or other types of insurance products.
This comes in handy for companies and consultants that need proof of insurance to sign a contract or a lease and don’t have time to call an insurance company for documentation. Clients and landlords may ask for a certificate of workers' compensation insurance or other types of business insurance to show you’re insured.
Does workers' compensation prevent employee lawsuits?
Workers’ compensation insurance helps employers avoid work injury lawsuits, since workers don’t have to take you to court to recover their medical costs and wages.
To prevent double-dipping and ensure a win-win for you and your employees, injured employees must agree not to sue your business when they accept workers’ comp benefits.
If your policy doesn’t pay out as much as injured employees want or think is fair, they can refuse their workers’ comp benefits and sue your business for personal injury instead. Luckily, workers’ comp policies usually include employer’s liability insurance to cover the cost of these lawsuits.
Businesses in North Dakota, Ohio, Washington, and Wyoming must purchase workers’ comp through a state fund. These policies don’t include employer’s liability insurance, which leaves you vulnerable to employee lawsuits. To fill this gap in coverage, you can buy employer’s liability insurance from a private insurance carrier.
Workers’ comp is a no-fault system, meaning you don’t have to worry about who’s to blame when it comes to a work-related injury. Once a workers' compensation claim is approved, your worker will have their medical bills and disability benefits covered. And in exchange, they give up their right to sue you.
Learn more on how workers' compensation insurance works.
How can you reduce the risk of workplace injuries?
A safe workplace means less risk of employee injuries. Businesses that emphasize workplace safety are also less likely to make a claim on their policies. This helps keep the cost of workers’ compensation insurance coverage low.
There are simple steps you can take to reduce hazards and create a safe workplace:
- Encourage your employees to stretch and take frequent breaks
- Provide an ergonomic setup with good lighting to prevent repetitive stress injuries along with eye strain, headaches, and other common complaints
- Avoid clutter by removing loose rugs and taping down wire
Even a minor mishap can lead to major medical expenses. That’s why it’s so important to take these precautions.
Learn more strategies on how to reduce liability claims against your business.
Where can I learn more about workers' compensation insurance?
If you want to learn more about this policy, you can find additional answers in our frequently asked questions about workers' compensation insurance.
If there are any additional questions you have about coverage, you can also contact a TechInsurance agent.