Each year, 340 million occupational accidents occur around the world. A further 160 million work-related accidents are reported. 2.3 million workers succumb to these accidents and diseases per year.
These statistics are frightening and point to the importance of taking reasonable care to ensure that your workplace is safe for your staff. But even with the best-laid plans, accidents can still happen. When they do, workers’ compensation insurance can provide coverage.
In this comprehensive guide, we tell you all you need to know about workers’ compensation for small businesses so you can make informed decisions. Read on to learn more.
What Is Workers Compensation Insurance?
Workers’ compensation insurance refers to a type of insurance that provides medical care and cash benefits for employees who suffer injuries as a direct result of their job.
Workers’ compensation laws for small businesses give workers the right to collect funds for disability, injury, or death when it happens in the course of employment.
The workers’ compensation vs employers liability insurance confusion is common among many small business owners. The latter kicks in where workers’ comp doesn’t cover a worker’s injuries or illnesses. It’s typically offered in the same plan as workers comp insurance and will cover you when an injured employee files a lawsuit against your business
Workers Comp and No-Fault Laws
The laws governing workers’ compensation are no-fault laws. That means an injured employee is entitled to compensation for their injuries without needing to prove fault against their employer.
The amount of compensation an employee will receive isn’t affected by any potential guilt or carelessness on their part. But there are circumstances in which an employee can lose their right to compensation. These include injuries resulting from:
- Impairment by alcohol or drugs
- An attempt to injure themselves or someone else
All states in the US require workers’ comp for small businesses, with the exception of Texas. However, the specific regulations and requirements vary depending on the state.
What Are the Benefits of Getting Small Business Workers’ Compensation?
Getting sufficient workers’ compensation coverage can benefit you as a business owner in many ways. The policy can protect your business from lawsuits arising from work-related injuries. It also ensures that you don’t pay for employee injuries directly, which might impact your finances significantly.
Besides, workers’ comp is a legal requirement in almost all states. Purchasing the policy thus saves you from paying hefty fines or facing imprisonment for non-compliance.
But this type of insurance doesn’t benefit business owners only. Your employees benefit by receiving financial protection in case they’re injured while working. Most workers can’t afford to pay for medical expenses or lost wages out-of-pocket.
Who Needs Workers’ Compensation Insurance?
As we’ve already pointed out, all businesses with employees are required by law to carry workers’ comp insurance, unless these businesses are in Texas. But even if your state doesn’t require workers’ comp, paying for work-related injuries out-of-pocket can devastate your company financially.
What if you don’t have employees? Then you won’t need a workers’ compensation policy from a legal standpoint. But you can still opt to invest in such a policy, especially if:
- Your clients require you to have workers’ comp insurance before they work with you
- You’d like a cover for you in case you suffer injuries while working
- You use contractors from time to time in your business
As you can see, workers’ comp for small business owners is beneficial, regardless of the state your business is located in and whether or not you have employees.
Where Can You Buy Workers Comp Insurance?
Workers’ compensation insurance isn’t included in your business owners policy (BOP). You’ll need to purchase it separately.
Different states have different rules regarding where you may buy a workers’ comp policy. Some states have a state monopoly insurer referred to as a state fund from whom employers must purchase workers’ comp. Others have both a state fund and private insurers offering this policy.
What Is the Cost of Workers’ Comp Insurance?
The cost of a workers comp policy is determined by a variety of factors. These include:
Your Business Location
Workers comp insurance is regulated at the state level, which means that the cost of your policy will depend on where your business is located. Visit the relevant state workers comp agency to find out how much you need to pay.
Your payroll size determines the insurance rate you’ll get for your workers’ comp policy. Payroll, in this case, includes such categories as salaries, wages, overtime, and bonuses. Use an average of your monthly payroll to get an estimate when shopping for workers’ comp insurance.
Your Claims History
Your potential insurance provider will also want to know your history of workers’ compensation claims when calculating what rate to give you. Your claims history is a clear reflection of how safe your workplace is compared to similar businesses.
Where your claims history is higher than the industry average, you can expect to pay a higher premium for your insurance policy. Fewer workers’ comp claims may attract discounts and more favorable rates.
The good news is that there are easy ways you can reduce your workers’ compensation insurance premiums. The trick is to prioritize employee safety in your company, which drastically cuts the risk of being hit with workers’ comp claims.
Protect Your Business With Workers’ Compensation Insurance
Workplace injuries are a nightmare for any business owner. One of the proactive measures you can take about these injuries is to purchase sufficient workers’ compensation insurance.
A workers’ comp policy makes sure that any employee injured in the course of work receives the medical care and compensation for lost wages they need to live decently. It also shields you from the financial implications resulting from work-related injuries.
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