Do I Need Workers' Compensation for My Small Business?

You may be required to carry workers’ compensation insurance for your small business—depending on the laws in your state.

Each state has its own requirements and exemptions. Considering the following details about your small business can help you determine whether you are legally required to carry workers’ compensation insurance. Once you’ve thought about your answers, visit your state’s workers’ compensation website or contact the state’s workers’ compensation board to determine whether your business requires coverage.

Of course, even if you’re not required by law to obtain coverage—after learning more about what it takes to protect your business assets and your valued team members—you may just decide getting worker’s comp it’s a wise choice anyways.

Small business workers’ comp questions for owners

• Do you have any employees?

• If so, how many employees do you have?

• What is your business structure (sole proprietorship, limited liability corporation, partnership, single-member, multiple-member, etc.)?

• Are you an independent contractor, contractor, or subcontractor?

• Does your business have executive directors, executive officers, or board members?

• If so, how many members are on your board or in your partnership?

• Is your business a non-profit, charity, or religious organization?

• Are you in the construction industry?

• Are you in the agriculture or aquaculture industry?

• Are you in the organized professional sports industry?

• Do you have real estate agents that work with/for your business?

• Do you use freelancers?

• Do you use newspaper carriers?

• Do you use licensed barbers or cosmetologists?

• Do you use musicians?

• Do you use securities and insurance salespeople?

• Do you have delivery drivers or taxi drivers?

• Do you have commercial motor carrier operators or truckers?

• Do you have maintenance/repair workers?

• Do you have domestic employees, farm laborers, non-commercial cleaners?

• Do you use subcontractors?

• Do you use volunteers?

• Do you employ family members?

• Do you employ teenage babysitters?

• Are your workers part-time, full-time, temporary, seasonal, or migrant laborers?

• Do you operate in different states?

• Are you involved in interstate or intrastate commerce?

These questions should give you a general idea of the type of information you’ll need to know to find out whether you’ll be required to have workers’ comp coverage. Be sure to dig in and fully research the requirements in your state—and consult a workers’ compensation attorney if you’re unsure.

Remember, if you don’t have coverage for your employees, you could face fines and imprisonment depending on your state. Don’t delay!

Workers’ comp insurance helps protect your small business

Even if you discover you aren’t required by law to carry workers’ comp, you might want to invest in this valuable type of protection. This is because if you or one of your employees is injured due to a work-related incident, workers’ compensation can help pay for medical expenses, lost wages, rehabilitation, and even death benefits. Further, workers’ comp insurance helps reduce the chances that you may have to pay out of pocket to cover medical expenses and it also helps limit your liability for workplace injuries.

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.