The chances are that if you own a business and have employees, then you need workers’ compensation insurance. Coverage is mandatory for most employers in every state (except Texas) to pay the medical bills and lost wages of employees hurt in workplace accidents. Without workers’ comp, employers would have to cover these costs out of pocket.
The Hartford provides expert small business insurance specialists who can help you determine the workers’ compensation requirements in your state to ensure you have the right coverage. Get a fast, no-obligation quote with The Hartford’s simple online application.
Who Needs Workers’ Compensation Insurance?
Workers’ compensation insurance is a type of business insurance that employers—sometimes even sole proprietors—have to get in most states. Failing to meet your state’s workers’ compensation requirements can result in fines or jail time. Your responsibility to provide coverage usually depends on how many employees you have, but the type of work they perform and your industry can play a role, too.
The following four categories represent businesses that typically need workers’ comp insurance.
Businesses Located in the United States
With the exception of Texas, all 49 states and the District of Columbia require employers to carry workers’ comp—and each state has its own spin on it. Some states require a business owner to provide insurance for themselves as soon as they hire a single employee while others mandate coverage once a business has a certain number of employees.
A few states only require employers to provide workers’ comp for full-time workers, but others may say businesses have to cover contractors, temporary workers, seasonal workers, part-time staff, and interns. Meanwhile, most states also have a list of workers’ comp insurance exemptions for certain types of employees, such as family members, domestic workers, or limited liability company (LLC) members. You can check out the general requirements in our state-by-state workers’ compensation guides.
Did You Know?
Business owners who do not buy workers’ compensation insurance when they are required to face penalties like steep fines or jail time. For example, if a Florida business is found to be operating without workers’ comp, the state can order it to cease all operations until it complies with the law and pays the penalty. The penalty is equal to two times the amount the employer would have paid in manual premium within the preceding two-year period.
Businesses in High-risk Industries
Businesses in high-risk industries, like manufacturing and construction, need workers’ compensation to safeguard their assets from lawsuits and reduce the overall cost of worker injuries. States often have laws specific to businesses in these industries that require the owners to get workers’ compensation insurance no matter how many employees the business has. In particular, construction businesses often are required not only to cover their own employees but also provide insurance for the employees of any subcontractor who doesn’t carry workers’ comp.
Businesses Acting as Subcontractors
One of the effects of state laws requiring certain businesses to cover subcontractors’ employees is that they often chose to only work with subcontractors who have their own coverage. If you’re acting as a subcontractor for a client, these companies will ask to see your certificate of insurance with your workers’ comp listed.
Tip: Some business owners who don’t have employees but who have clients that want them to carry workers’ comp can sometimes buy a ghost policy to fulfill this requirement. Ghost policies aren’t available in every state, so talk to your insurance agent to see what’s available.
Businesses That Want to Reduce Risk
Workers’ comp insurance protects your business by reducing the risk of a lawsuit. Employees are less likely to sue if their costs are taken care of by their employer. Many workers’ comp policies also have a second coverage part called employer’s liability insurance. It kicks in when an injured worker forgoes their workers’ compensation benefits and sues for negligence.
Some business owners get workers’ compensation insurance for themselves even if they don’t have staff. This protects their business if they suffer an injury that keeps them from earning income.
Why Do I Need Workers’ Compensation Insurance?
Most states require workers’ compensation insurance because employers have a legal responsibility to keep employees safe. Without workers’ comp, employers would have to pay out of pocket for medical treatments, lost wages, and death benefits. Plus, if there’s a lawsuit, then you would have to pay your legal fees and, quite possibly, those of the injured employee.
Workers’ compensation insurance means employees receive workers’ compensation benefits regardless of who’s at fault. In exchange, employees have limited rights to sue their employer for damages for those injuries. Additionally, businesses with employees in multiple states must have coverage that meets each state’s regulatory standards.
What Workers’ Compensation Insurance Covers
Workers’ compensation insurance, commonly known as workers’ comp, covers employees for work-related injuries and illnesses. A workers’ comp policy provides coverage for medical bills and lost income. Also, if an employee dies from a work-related accident, workers’ comp can cover funeral costs and pay death benefits to the worker’s family. Many states also offer vocational rehabilitation to help injured employees either return to their previous positions or find new employment.
Most Common Nonfatal Workplace Injuries
Workplace injuries are commonplace, even in industries that typically have a safe work environment. While a construction worker typically faces riskier situations more often than an office worker, they both have a chance of slipping and falling or experiencing a strain in the scope and during the course of their employment. The majority of workplace injuries stem from overexertion or repetitive motions. This is a risk for office workers and manual laborers alike.
According to the US Bureau of Labor Statistics, the most common causes of nonfatal workplace injuries are:
- Overexertion and repetitive motions: Incidence rate of 30 per 10,000 full-time workers 30.0
- Struck by an object: 23.2 per 10,000 full-time workers
- Falls, slips, and trips: 23.1 per 10,000 full-time workers
- Transportation incidents: 4.9 per 10,000 full-time workers
- Violence and other injuries from persons and animals: 4.0 per 10,000 full-time workers
- Exposure to harmful substances or environments: 3.8 per 10,000 full-time workers
- Fires and explosions: 0.1 per 10,000 full-time workers
Sometimes, workplace injuries and accidents are unavoidable, but smart safety measures and preventive actions can help reduce the risk of an injury at your workplace. However, even with safety protocols in place, your employees can get injured. Moreover, they can fall victim to repetitive stress injuries like carpal tunnel and other occupational diseases.
Not only does workers’ compensation insurance cover your liability if an employee were injured on the job but, by paying for necessary medical care, it gets them back to work quickly. This can have a positive impact on your bottom line as it helps you retain workers.
Workers’ Compensation Insurance Frequently Asked Questions (FAQs)
Workers’ compensation insurance can be a complicated and confusing topic for business owners because of its wide variety of regulations and requirements. Below are a few commonly asked questions.
Do I need workers’ compensation insurance for independent contractors?
Independent contractors are not employees, so business owners generally do not have to provide workers’ compensation for them. However, business owners cannot classify workers as independent contractors to avoid paying for workers’ compensation. Most states have their own definition of an independent contractor, so you should review the information available on your state’s website before you decide to forgo workers’ comp.
Do I need workers’ compensation insurance if I’m self-employed?
Business owners do not usually have to get workers’ comp, so self-employed people most likely don’t need a workers’ comp policy for themselves. However, some states may require the self-employed to get workers’ comp if they’re working in a high-risk industry like construction. Check your state’s requirements to ensure your business complies accordingly.
What should I do if one of my employees is injured at work?
If one of your employees is injured on the job, assess the situation, and act quickly by calling emergency services if it’s necessary. Document your employee’s injuries and report the incident to the Occupational Safety and Health Administration (OSHA) and your state’s workers’ comp board. Communicate with your employee openly and collaborate to file a workers’ comp claim with your insurance provider.
How do I file a workers’ compensation claim?
If one of your employees is injured at work, report the accident to your small business insurance company as soon as possible to begin filing a workers’ comp claim. You’ll need to work with your employee to provide necessary documentation and information, including how the accident happened, the kind of injury, and the date and time of the incident.
Bottom Line
In most cases, employers are required by law to obtain workers’ compensation to pay for costs when an employee suffers a work-related injury. Workers’ comp insurance is state-regulated, and there are many exceptions and stipulations associated with it, so it’s important to check your state’s rules and requirements.
