A Basic Guide to Workers’ Compensation Insurance
Everyone who wants to be an entrepreneur and intends to hire employees should learn about workers’ compensation insurance. It is a mandatory insurance coverage that benefits both employers and employees. When an employee is injured or becomes ill at work, they can file a workers’ compensation claim to cover medical treatment costs, including multiple doctor’s appointments and medications. It may further cover therapy, rehabilitation, and recovery equipment. The patient may need ongoing care for conventional or alternative types of healthcare treatment.
Here’s a look at the most important points that you need to know about workers’ compensation coverage.
Types of Workers’ Compensation Benefits:
- Medical care: Covers employees when they suffer injuries on the job
• Vocational rehabilitation: Includes care needed to help the patient smoothly transition back to the workplace
• Disability benefits: Paid to workers who are unable to return to work due to sustained injuries
• Death benefits: Paid to the family of a deceased employee killed on the job
• Employer liability: Protects against employee negligence
• Litigation costs: Pays for the company’s legal fees if an employee tries to sue the employer
General Liability Vs. Workers’ Compensation Insurance
Your insurance options for your business will initially be shaped by your state’s laws on private and public workers’ comp markets. Workers’ compensation began in the United States in the Progressive Era of the early 1900s. Since then, states have made their own specific requirements as to who needs the insurance. Insurance companies that serve large corporations tend to stay away from businesses with less than five employees.
If your company makes millions of dollars and you have dozens of employees, you definitely need workers’ compensation insurance. Most small businesses in most states are required to carry the coverage. However, general liability insurance isn’t required in most places. Both types of policies cover bodily injury. Without this type of coverage, your business is wide open to a lawsuit if a worker gets hurt on the job.
Even though workers’ compensation and general liability seem similar, they each provide different kinds of benefits. Workers’ compensation plans, for example, only cover your employees, whereas general liability covers third parties who may not work for you, such as customers. Also, general liability covers litigation costs for claims of bodily injury and property damage against an organization, whereas workers’ compensation is more focused on paying medical bills.
General liability may also cover the legal costs of court challenges involving libel, slander, advertising injury, and trademark infringement. Even small businesses can benefit by purchasing both types of insurance.
Workers’ Compensation Insurance Requirements
Since workers’ compensation is regulated at the state level, it’s best to understand your state’s unique requirements before launching an enterprise. Failing to comply can result in a very expensive penalty. Be aware of the fact you will have certain social responsibilities as a business leader in your community. Regulations on workers’ compensation apply to the state where employees work, not necessarily where the company is based.
Do Business Owners Need Workers’ Compensation?
Not all businesses need to buy workers’ compensation insurance, but in most cases, the answer is yes for companies with one or more employees. In some states, corporate officers are permitted to take exemptions from coverage. However, you can save yourself the worry on which path to take by discussing your business operation with your insurance agent, who can then inform you of your options.
It’s best to think ahead and come up with answers to “what if” scenarios that could hinder your business, such as accidents involving equipment or unforeseen disasters. Your options will be shaped by the type of risks your industry poses to workers. If they work on dangerous machines, for example, the risk of injury will be higher and reflected in your monthly premiums. Low-risk jobs where employees work at home might not need as much coverage.
Cost of Coverage
All employers with staff members need to treat workers’ compensation as a necessary annual budget cost. It’s also crucial to understand how the insurance company determines its costs, so that you can make decisions that could lower monthly premiums. Usually, lowering risks is the key to reducing insurance rates, which might include investing in safety training and posting warning signs.
The four main factors that affect your insurance rates set by state officials are class code, location, payroll, and experience. Class codes are associated with industry risks, as construction jobs pose higher risks than desk jobs. The location matters, especially if your business is located in an area with exposure to toxic chemicals and hazardous waste. The greater amount you pay in payroll, the more you will be paying in insurance costs.
How to Buy Small Business Workers’ Compensation Insurance?
- Review your state requirements, then decide which employees need coverage.
- Evaluate the gross annual payroll of every worker to determine the total amount which their workers’ compensation policy should cover.
- Shop around for an agency licensed to sell business insurance in your state. If you run a small business, find a carrier that specializes in workers’ compensation for small businesses.
- Get a policy quote from the insurer, which can usually be done through its company website. Be prepared to share your EIN and payroll numbers.
Most businesses of all sizes can benefit from purchasing a workers’ compensation coverage plan along with a general liability policy. Usually, the bigger the staff, the more coverage you need, making you eligible for group discounts. Talk with an insurance expert at Remland Insurance to make sure all your insurance needs are covered. To get started, contact us today!