Do I Need Workers’ Comp Insurance? A Guide for Small Business Owners

Even in the safest workplaces, accidents can happen. When they do, workers’ compensation insurance is there to help protect both you and your employees. But do small businesses with only a few employees really need this coverage? The short answer is yes. In fact, most states mandate some form of workers’ compensation insurance. Let’s explore when and why this coverage is necessary.

What Is Workers’ Compensation Insurance?

Workers’ compensation is a type of commercial insurance that provides financial benefits to employees who experience work-related injuries or illnesses. Depending on the situation, it may cover medical bills, lost wages, rehabilitation costs, and more. Workers’ compensation also helps shield small business owners from lawsuits and claims related to workplace injuries.

What Does Workers’ Compensation Cover?

Workers’ compensation provides coverage for a variety of work-related injuries and illnesses, ranging from equipment-related accidents to conditions caused by hazardous environments. It often applies to full-time, part-time, and seasonal employees. Key areas of coverage include*:

• Medical expenses – Reasonable and necessary medical treatment costs, including surgeries, hospital stays, and rehabilitation therapies.
• Income benefits – Compensation for wages lost while the employee is unable to work.
• Funeral costs and death benefits – Assistance with burial or cremation expenses and financial support for the employee’s family.

Do All Companies Need Workers’ Comp?

If you have employees, you likely need workers’ compensation insurance. However, specific requirements depend on your specific state’s workers’ compensation laws. These laws typically outline:

• When coverage is required based on the number of employees.
• Which business owners, if any, are exempt from purchasing coverage.
• The options available for purchasing workers’ comp insurance (commercial carriers or state funds).
• Fines and penalties for failing to maintain proper coverage.

For instance, Arizona requires businesses with at least one employee to carry workers’ compensation insurance, though sole proprietors may be exempt. In Ohio, businesses with one or more employees must have workers’ compensation, but coverage is only available through a state-administered fund. Noncompliance with workers’ compensation laws can lead to significant fines and penalties.

Do You Need Workers’ Comp for 1099 Contractors?

Whether or not you need workers’ compensation for 1099 contractors depends on your state and the nature of your relationship with them. In general, 1099 contractors are not covered by workers’ comp insurance, but some states require coverage for specific types of contractors. Be sure to check local regulations to ensure compliance.

Is Workers’ Comp Insurance Required for Self-Employed Individuals?

While most state laws don’t require self-employed individuals to carry workers’ compensation insurance, it can still be a smart choice, especially for those in high-risk professions. If you’re injured on the job, a workers’ compensation policy can help cover your medical expenses and lost wages, providing valuable financial protection.

How Much Does Workers’ Comp Insurance Cost for Small Businesses?

The cost of workers’ comp insurance for small businesses varies based on several factors, including:

• Industry
• Number of employees
• Employee classifications
• Payroll size
• Claims history
• Business location

For example, businesses in lower-risk industries, such as accounting, may pay less than those in higher-risk fields like construction. Working with an insurance agent can help you estimate costs and select the right coverage for your business.

How to Get Workers’ Compensation Insurance

Start by reviewing your state’s requirements for workers’ compensation coverage. This will help you determine if you can purchase coverage from any insurance carrier or if you must use a state-approved fund.

Westfield offers a robust workers’ compensation program designed to help protect your small business and support your employees. With services like 24/7 nurse triage, medical bill reviews, and the WesWorks® return-to-work program, we help get your employees back to work swiftly and safely.

Ready to explore your options for workers’ comp insurance for small businesses? Connect with an agent today.