Do You Need Workers Compensation Insurance for Small Business?


The benefits of workers’ compensation insurance far outweigh its cost. Do you need workers’ compensation insurance? The answer may be more complex than you think.

For example, do remote workers need to be covered? Do you need compensatory benefits for part-time workers? What about subcontractors working for you?

Small business owners know how to prevent workplace injuries. Still, there are accidents. And that makes workers’ compensation insurance one of the most important types of business insurance.



What is workers’ compensation insurance?

Also known as workers ‘compensation, workers’ compensation insurance is coverage for employees if they are injured or become ill at work. In most states, small businesses must have it if they have employees.

Why you should take out workers’ compensation insurance

Suppose you are a small business owner in Texas. Workers’ compensation insurance is not required there. In Arkansas, if you have less than 3 employees, you don’t need it. In Alabama, it is mandatory if you have 5 or more employees.

Regardless of your state’s requirements, you should take out workers’ compensation insurance to protect your business:

  • An employee who is injured or ill at work can sue you, looking for lost wages and payment of medical expenses.
  • For the same reason, you should cover part-time workers and subcontractors. Nothing would stop them from suing you for lost wages and paying medical bills if they get injured or get sick in your business. You can add them to your workers’ compensation coverage package. It is your safety net against legal costs and medical treatment costs.
  • In most states, companies require workers’ compensation, even if there is only one employee.
  • Even if your workforce no longer works for the company, you should cover remote workers. Remote workers are doing work-related tasks during business hours and need coverage.

What you need to know about workers’ compensation and remote workers

As a small business owner with remote workers, you need to take steps to ensure that your work environment is safe. Increasingly, an insurance company may require you to conduct a physical inspection of employees ‘remote workplace before providing workers’ compensation coverage.

The most common workers’ compensation claims reported by remote workers are slipping, tripping, and falling. They also report ergonomic injuries due to poor workstation design.

As a manager or boss, you should take steps to ensure that the remote worker’s workplace is safe and ergonomically correct. Although they work remotely, you must carry workers’ compensation insurance for them.

What does workers’ compensation insurance cover?

Why do you need a workers’ compensation policy? In most states, workers’ compensation laws require you to provide it as business insurance.

This is what the workers’ compensation system covers:

Medical expenses

An insurance company helps cover medical expenses associated with work-related injuries. Compensation benefits for workers help to cover medical bills and expenses related to employee injuries or accidents at work. Coverage will include medical care, physical therapy and ongoing support.

Lost wages

Workers’ compensation coverage will provide the injured party with lost wages, similar to long-term disability benefits.

Death benefits

If an employee dies as a result of a work-related injury, accident, or illness, the workers’ compensation insurance policy will pay death benefits.

Injuries and illnesses of employees during work

Injuries and illnesses of part-time workers and subcontractors

Check with your insurance company to see if you can purchase coverage and add part-time workers and independent contractors to your workers’ compensation policy. Add a level of financial protection to your business in the event of a worker becoming ill or injured at work while at work.

What is not covered by workers’ compensation insurance?

General Commercial Liability Insurance, General Liability Insurance, Professional Liability Insurance, Business Ownership Policy, and Property Insurance cover your business and its products or services.

What does workers’ compensation cover? Workers ’compensation coverage is for employees while they work. At other times, they are covered by health insurance.

Unique workplace and off-the-job events can occur. Some things just aren’t included in workers’ compensation coverage.

  • COVID-related illnesses and medical costs: Check with your insurance company and status. During the pandemic, coverage was expanded to include COVID-related illnesses, especially for front-line workers, such as nurses, doctors, and emergency personnel (police, firefighters). In most states, the time period for this coverage is over. Usually, not during a pandemic, “common contagious diseases” are not covered. This is because it is difficult to show where and when the employee contracted the disease.
  • Part-time employees and subcontractors are not covered unless you specifically add this coverage. Only Arizona prevents companies from adding these classes of workers to coverage for an occupational injury or illness.
  • Injuries that occur at work functions, such as a softball game or a picnic, if participation is voluntary. (If you want workers to be covered for job duties, please indicate in writing that attendance is mandatory.)
  • Injuries that occur, such as a fight between two employees that occur for personal reasons not related to work.
  • An occupational injury or illness or accident that occurs because an employee is intoxicated or under the influence of illegal drugs. Of course, it should be the company’s policy that employees cannot be at work in these conditions. A signed agreement for this should be in the files of your employees.

How Much Does Compensation Insurance For Small Business Workers Cost?

You may be able to take out workers’ compensation insurance in accordance with your business owner’s policy. There are several factors that alter the cost of workers’ compensation insurance: payroll, type of work performed, and claims history.

For example, the cost is typically $ 1 to $ 1.56 for every $ 100 (gross). This cost varies by state and may change annually. The job type is part of the calculation, using 700 class codes for job types. These two factors are calculated. Then the total will be multiplied by 1 to calculate the workers’ compensation costs, if you have not had any claims. The multiplication factor will change depending on your number of claims.

U.S. Workers’ Compensation Insurance Requirements

Laws vary, but in general, you must take out workers’ compensation insurance if you have employees. There are some exceptions, as noted above. If you have to get workers’ compensation and you don’t, you could face criminal charges for a felony.

How To Get Compensation Insurance For Small Business Workers

You can set up and buy workers’ compensation insurance online with just a few clicks.

  1. Check your state requirements and start coverage with the first employee you hire if necessary.
  2. Connect with other business owners for recommendations.
  3. Choose an insurance company that offers broad coverage in the world of business insurance and has experience in workers’ compensation coverage.
  4. Get a compensation quote from workers at various companies and review your options.
  5. Choose and sign up for a policy.

Image: Depositphotos


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