Workers’ comp insurance helps cover an employee’s medical bills and lost wages and an employer’s legal expenses in the case of a work-related injury. Each state administers its own workers’ comp program through a commission or board that makes sure businesses comply with workers’ comp laws.
All states except Texas require that businesses with employees carry workers’ comp insurance, but the specific requirements and regulations vary by state. If you are an employer, you will likely need to cover all of your employees, but you may not be required by law to carry coverage for yourself as an officer or partner.
However, in certain industries like construction, you often need to show proof of workers’ comp insurance before you can begin work. Many clients and customers will ask to see proof of your coverage, so it’s a good idea to get workers’ comp insurance for yourself as well as your employees.
Also, paying out of pocket for work-related injuries can be financially devastating for a company. Regardless of the laws in your state, to avoid this type of financial loss you’ll need to have coverage for yourself and your workers.
Both employer and employees benefit from having workers’ comp insurance.
As an employer, your workers’ comp policy helps protect your company from being sued by employees for workplace injuries, and it keeps you from having to pay directly for employee injuries. This coverage can reduce your risk of significant financial loss in case one of your employees is harmed while performing work duties. Additionally, since workers’ comp is legally required in nearly every state and situation, having adequate coverage and following policy requirements ensures you won’t have to pay fines or even worse – face imprisonment.
As for your employees, they will also benefit since they will receive financial protection for an injury that occurs at work.
When you purchase a policy for your company, the insurance provider will estimate your workers’ compensation premium. Then, after the policy period is over, your provider will perform an audit to ensure that the estimate was accurate. Your business will receive a refund or pay additional premium depending on whether there were changes in your business’s risk or workforce composition.
There are many factors insurers consider when calculating your premium, but the three main components are:
Each state has a commission or board that administers workers’ compensation. These state agencies typically make sure that businesses comply with workers’ comp laws, collect relevant accident information, and make decisions on cases.
To learn more about the laws that affect your business, you can view this state-by-state comparison of workers’ comp laws. This useful resource is maintained by the National Federation of Independent Business (NFIB) and provides links to each state agency.
In most states, you have some workers’ compensation employer obligations you must follow:
Depending on your state, you will likely need to:
To find the best workers’ comp insurance for your small business, look for a company that offers:
Thanks for reading! Please note that this content is intended for educational purposes only. As laws change regularly, you should refer to your state legislation and/or an advisor for specific legal counsel. If you’re a small business owner, learn more about workers’ compensation insurance or check your current rate in 3 minutes.