Workers’ Compensation for Small Business
Do I Need Workers’ Compensation Insurance for My Small Business?
It’s a question that business owners in every state and industry wrestle with: “Do I need Workers’ Compensation insurance for my small business?” Statistically, the answer is most likely yes. According to the National Council on Compensation Insurance (NCCI), Workers’ Compensation is typically required by law in 49 states, and it’s generally a good idea for businesses of all sizes to have coverage. Workers’ compensation can provide financial protection for your employees if they are injured on the job, as well as help protect your business from potential liability lawsuits. Read on for more information about Workers’ Compensation insurance and how it can benefit your small business.
What is Workers’ Compensation Insurance?
Workers’ Compensation Insurance (also known as Workers’ Comp) is an insurance program that provides benefits to employees who have been subject to work-related injuries or illnesses while on the job.
For example, if a grocery store worker is injured on the job, a Workers’ Comp policy would help cover several different expenses. Firstly, it would cover that employee’s medical bills or other medical expenses incurred due to the on-site incident. The policy would also cover part of the lost wages the employee may have while out recovering. If this employee turns around and sues the business for the injury-causing incident, the policy will also cover the business’s legal fees in defense of the suit.
How is Workers’ Comp Different from General Liability Insurance or Small Group Health Insurance?
For your small business you may have already purchased General Liability insurance or possibly a Small Group Health insurance plan for your employees - but these do not protect you in the same way that Workers’ Compensation insurance does.
Utilizing the same grocery store example, we will examine the difference between the three. While Workers’ Comp covers the cost of employee medical expenses and legal fees if an employee is injured on site, Workers’ Comp’s primary focus is mitigating the risk of work related injuries or illnesses incurred by employees while on the job. General Liability covers the expenses when a customer or a non-employee is injured on the premises. For instance, if a customer enters the grocery store, slips and ends up in the hospital - General Liability will help cover those costs as well as help protect you financially from potential legal action.
Small Group Health Insurance, on the other hand, covers employees who become sick or injured away from the job. It serves more so as a personal health insurance for employees and does not protect the business owners from having to pay the costs if the employees are involved in a work-related accident.
Why Should I Buy Workers’ Comp Insurance if I Don’t Think Any of My Employees Will Ever Get Injured?
The benefits provided by Workers’ Comp insurance typically tend to heavily outway the costs. Having an employee injured on the job can not only be expensive when paying for the expenses out of pocket, but can also result in a disruption of the workflow and worse - a lawsuit. You can never be too sure of what may happen and it is much better to have yourself protected than incur a major setback financially.
While Workers’ Comp insurance may be essential for most, some small business owners may feel like it is not a necessity. These owners may have a good reason, but there are several factors that determine whether or not they even have a choice of whether to carry it or not.
Why Would I Be Required to Carry Workers’ Comp for My Small Business?
Location, industry, and the number of people you employ can all affect whether or not you are required. Typically more risk averse industries, such as construction, have tighter restrictions and more requirements. The number of people you employ is typically a measuring tool for requirements as well, depending on where your business is located. The state that your business is located in can greatly impact your insurance needs and requirements.
Let’s take a look at Florida, Georgia, and Texas for example:
The state of Florida requires businesses to purchase Workers’ Compensation Insurance for all businesses that employ 4 or more people, including part-time employees. Independent contractors, however, do not count towards the total number of employees. This law , though, does not apply equally across all industries in the state. Florida requires any construction business, even if you are self-employed, to carry Workers’ Comp insurance for ALL employees.
In the state of Georgia the Workers’ Comp insurance laws are a bit different. Georgia actually enforces the Workers’ Comp requirement on all businesses that employ 3 or more employees, 1 less than Florida. In Georgia, officers of incorporated businesses are considered regular employees, but up to 5 of them can waive their coverage and remove the cost from the business.
Texas has the least strict of the states, and having the least amount of requirements among the 3. The state of Texas does NOT require businesses to carry Workmans’ Comp insurance regardless of the number of employees they have or the inherent risk of their industry. Even though the insurance is not required, most small businesses in Texas still do carry Workers’ Comp policies in order to fully protect themselves and prevent an accident from being a hindrance to their business.
Requirements vary across all states so it is important to check with your insurance agent what the requirements may be and find the best plan for your business.
What If I Don’t Buy Workers Comp Insurance?
Most states have heavy penalties for not carrying Workers’ Compensation insurance when it is required. Expensive fines and stop-work orders can come into play as well as criminal penalties. Misdemeanors, felony charges, and even jail time could all be imposed for not following your state’s rules regarding Workers’ Comp.
In the case of an employee accident while not carrying a Workers’ Comp policy, the business would be responsible for the cost of any medical treatments, lost wages, and other benefits that your Workers’ Comp policy would have paid. According to the National Safety Council, the average Workers’ Comp claim costs around $40,000. This is a huge cost and exponentially more expensive than what a Workers’ Comp policy would cost the business, another major factor as to why small business owners may purchase a policy even if it is not required by their state.
Worker's Compensation Insurance is something that every company should think about. Whether you're a small business or large corporation, Worker's Compensation insurance can provide peace of mind for your team and ensure they are well taken care of in the event of an accident on the job. If you want to know more about how this coverage can benefit your employees and organization, contact us today! We'll answer any questions you may have before helping figure out if it makes sense for your company to purchase their own policy or not. Ready? Get started below by filling out our quick quote form to get started!
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