If you own a business or are thinking about starting one, business insurance is an essential cog in protecting your company. We have a soft spot for entrepreneurs and have written helpful guides catered towards people venturing into self-employment for the first time. Now we’ve partnered with Embroker for a 4 part series on different types of business insurance and why it’s a necessity to protect your business.
Part one deals with workers’ compensation insurance, what it is and whether you need it. Check back over the next weeks for more information on what can be a confusing part of running a business.
Workers’ Compensation Insurance – Introduction
Imagine one of your employees accidentally takes a tumble down the stairs at work and he breaks his leg. Or another employee accidentally throws out her back lifting some heavy office equipment.
Workers’ Compensation insurance (also known as “Workers’ Comp”) protects your business from incidents arising out of and in the course of employment without adding extra financial burden to your business.
Every business that employs people has to deal with the issue of Workers’ Compensation. This study found that 35 percent of employers are more concerned about workplace safety than any other risk.
Regardless of the size of your business, dealing with workman’s comp insurance is an ongoing challenge.
What is Workers’ Compensation insurance?
Workers’ Compensation insurance handles injuries or illnesses caused by a workplace incident or exposure. It covers medical expenses, death benefits, lost wages, and rehabilitation.
The coverage is a win-win for both the business and the employees. In most instances, employees give up the right to sue their employer over a workplace injury, but get to feel secure knowing they’d be compensated for any workplace-related injuries.
Almost every state requires employers to carry Workers’ Compensation insurance. Even if you live in one of the few states that don’t — like Texas — you may discover customers reluctant to do business with you if you don’t carry it.
In most states, Workers’ Comp is a requirement if you have one or more employees. The penalties for failing to have it can be severe.
Who needs Workers’ Compensation insurance?
“Do I need Workers’ Compensation insurance?” is a critical question to ask yourself as a business owner, especially since it’s not always technically required. (For example, sole proprietors aren’t usually required to buy it, and joint partnerships with no employees may be exempt as well.)
Even if you’re not legally required to carry workman’s comp, you should look into it. There may be situations where having it could benefit you, even if you are self-employed with no employees.
For instance, let’s say you’re an accountant and you hire someone to clean the windows of your home office. Technically, you’re hiring an independent contractor to do work for your business. If that person gets injured and they don’t have workman’s comp coverage for themselves, they could file a claim against you and you’d be held liable for damages.
It’s also important to keep in mind that state regulations will change periodically. So even if you weren’t previously required to have Workers’ Compensation insurance, it’s a good idea to check up on state regulations from time to time.
As a general rule, if you own a business that interacts with people on a regular basis, or employs more than one person, you will most likely need Workers’ Compensation insurance.
Why do you need Workers’ Compensation insurance?
You need it because even the best safety precautions sometimes fall short. No one likes to imagine one of their employees being injured on the job, but it’s a reality you can’t ignore. Accidents can happen anywhere — even after the most comprehensive safety training in the most low-risk environments.
Workers’ Compensation insurance is usually mandated by the state, which makes it easy to viewed it as yet another overhead expense. But it’s actually a huge benefit both to you and your employees.
Should an employee be injured on the job, your legal expenses would be completely covered by your insurance. Plus, your employees will be completely covered for their medical expenses, wages for lost work, and any rehabilitation services. In the case of fatal accidents, funeral expenses are paid out to remaining family members.
Workers’ Compensation Insurance examples
The gig economy is growing and employees are paid through a 1099-MISC tax form as an individual contractor. However, in several incidents the court ruled that employees who were paid as an individual contractor are misclassified and should be compensated through the Workers’ compensation fund.
The New York Mets pitcher, Matt Harvey had to go through a right elbow surgery. A partly torn ulnar collateral ligament like Harvey’s is considered a workplace injury, just as if he were a truck driver hurt on a loading dock. Therefore, it will be paid with workers’ compensation insurance.
McDonald’s employees across U.S. allege they were seriously burned at work and not given first aid. Safety troubles are industry-wide, according to a national online survey of restaurant workers, 79% of fast food workers have been burned on the job during the past year.
Workers’ Compensation Insurance Costs
“Is it expensive?” might be the first question most business owners have about Workers’ Compensation insurance. The answer varies greatly from state to state.
There are three factors that go into determining your Workers’ Compensation premiums:
1) how many employees you have
2) the type of work they do
3) your company’s claims history
Your premiums can increase or decrease depending on your company’s history, employees access to company health insurance, and other factors.
Workers’ Compensation Insurance – Conclusion
Now that you understand the basics of Workers’ Compensation insurance and know why you need it, you may be wondering where to go from here. The best thing to do now is to chat with one of our expert brokers to help you find the right coverage for your business.
Rather than being elusive and forcing terrible paperwork on you, our brokers make insurance quick, simple and painless — thanks to cloud-based technology and partnerships with most of the top-rated insurance carriers in the country.
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