Guide to Workers' Compensation

In 2015, there were over 3.5 million occupational injuries and illnesses among U.S. workers. (Bureau of Labor Statistics) This is a big issue for both workers and employers, which is where workers compensation insurance comes in. It is important as a small business owner and employer to understand workers comp and maintain a safe work environment for your employees. Let’s break down how you can do this as an employer.

What Is Workers Compensation Insurance?

Workers comp provides coverage for both an employee and their employer in case of a work-related accident. Workers comp ensures that the worker gets financial compensation for both the time missed at work and for their medical bills, and that the employer does not get sued by the employee. No matter who was at fault in the accident, as long as drugs or alcohol was not a factor, the employee will receive workers comp.

If a worker is killed while on the job, workers comp will pay death benefits to the family of the deceased employee.

Each state is different! The benefits, terms and qualifications differ by state, so check your state’s workers compensation department website to find out more.

Is Workers Compensation Insurance Required?

In most states, workers comp is required once you have employees that are not owners, although sole owners and partners can get coverage if they desire. In some states, employees who are paid based only on commision are not required to be covered.

Some states do not require that you provide workers comp insurance until you reach a certain number of employees, between 3 and 5. Texas is the only state where workers compensation benefits remain optional no matter the number of employees.

Even if you are not required to provide workers compensation insurance, you should still seriously consider doing so. One serious injury or illness could easily bankrupt your small business through a lawsuit. Insurance protects you from this financial risk.

Most states require you to keep records of all accidents and report them in a certain number of days.

How Do I Buy Workers Compensation Insurance?

Workers comp is not included in a business owners policy. It must be bought separately. It depends on your state whether you buy the insurance from a state fund or from a private insurance company.

What Do I Pay?

You will have to pay premiums and deductibles just like any other insurance policy. Premiums go up depending on the danger of your industry, so a construction company will most likely have a higher premium than a hair salon.

Location also has an impact on your insurance premium. The more of a chance that your business will be affected by a catastrophe, the higher your premium.

If your premium is above a certain amount, it could be lowered if you do not have many claims over a period of time.

Workers Compensation Insurance is a good investment for any small business. Look into what your state offers and requires today.

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