Do Small Business Owners Need Workers Compensation?
Maintaining a safe, hazard-free workplace is key to keeping your employees healthy and your business running smoothly. But accidents happen, and when they do, it's essential to have workers' compensation insurance in place.
Do small business owners need workers' compensation if they only have a few employees or believe their workplace is safe? The answer is yes. In fact, most states mandate some type of workers' compensation coverage.
No matter the size of your business, it's important to understand your responsibilities for maintaining workers' compensation insurance.
What Is Workers' Compensation Insurance?
Workers' compensation is a type of insurance that can provide financial benefits to workers who are injured on the job. As the employer, you pay for workers' compensation coverage, and your insurer will pay out benefits if an employee files a compensable claim.
So why do business owners need workers' compensation coverage? This type of insurance offers some financial protection to you and your employees. If one of your workers suffers a compensable work related injury they can receive wage loss and medical benefits until they can return to work.
Providing workers' compensation insurance is a safe way to stay on the right side of state guidelines for providing such coverage. Navigating workers' compensation laws can be tricky at times, but a knowledgeable insurance carrier who works with experienced workers' compensation attorneys can help provide the service that you require.
Workers' Compensation Laws
When do small business owners need workers' compensation? This is a commonly asked question, and the simple answer is that if you have employees, you typically need workers' compensation insurance.
The requirements for workers' comp insurance vary by state and generally govern:
- When coverage is required, based on the number of employees
- Which business owners, if any, are exempt from purchasing coverage
- What options do business owners have for purchasing workers' comp insurance (i.e., commercial carriers vs. state funds)
- Fines and penalties for failure to maintain appropriate coverage
In Arizona, for example, workers' compensation insurance is mandatory for all businesses that have at least one employee. Exceptions are only allowed for working partners, independent contractors, casual servants, domestic workers employed in your home and sole proprietors who have no employees. Businesses can purchase coverage through a commercial provider.
Ohio also mandates workers' compensation for all businesses with one or more employee. But business owners are limited to purchasing coverage through a state-administered fund. That's also the case in North Dakota, Washington and Wyoming.
Failure to carry appropriate workers' compensation insurance coverage could result in fines or other penalties. In California, for instance, failure to have workers' compensation insurance is a criminal offense that's punishable by a $10,000 fine, one year in county jail or both.
What Does Workers' Compensation Cover?
Worker's compensation insurance generally covers work-related injuries and illnesses that are within the course and scope of employment and occupational diseases. For example, if someone is injured by a piece of machinery or gets sick after coming into contact with dangerous chemicals while at work, those could be covered under a workers' compensation policy.
Do business owners need workers' compensation for every injury or illness? Not necessarily. Some things may not be covered by workers' compensation insurance, including:
- Self-inflicted injuries
- Injuries that occur while the employee is intoxicated or under the influence
- Injuries that occur during the commission of a crime
- Illness or injury that results from a violation of employer policies
Regarding what workers' compensation insurance pays to employees, benefits typically fall into one of four categories of costs. They include medical expenses relating to a covered injury or illness, lost wages, rehabilitative costs if physical therapy or ongoing care is needed and funeral expenses in a worst-case scenario. Workers' compensation generally pays out benefits until the employee can return to work. State laws can establish minimum and maximum weekly benefit amounts and maximum terms for how long benefits can be paid. State law can also dictate how long an employee has to file a claim following an on-the-job injury or illness.
How to Get Workers' Compensation Insurance
If you're starting a new business or operating an established business and don't have workers' compensation coverage yet, it's important to get covered as soon as possible. Checking your state's requirements for coverage is an excellent place to start. Doing so can help you determine whether you can purchase workers' compensation insurance from any insurer or whether you'll need to use your state-approved fund.
Westfield offers coverage to help you protect your small business while ensuring your employees are compensated properly should an injury occur. Benefits include the WesCare(R) 24/7 nurse triage program, medical bill review and WesWorks(R), which helps your employees get back to work as quickly as possible.
If you're ready to explore your options for workers' compensation insurance, connect with an independent Westfield agent today.