Keeping employees healthy and safe is a top priority for small businesses.
But accidents happen from time to time, and you don’t want to get embroiled in an expensive lawsuit over a workplace injury. For this reason, most states require employers to enroll in a system of workers’ compensation.
Workers’ comp insurance for small businesses is beneficial for both employers and employees. It helps employers deal with injury-related workplace disruptions in an organized way. It also helps employees get back on their feet after suffering through an accident at work.
Workers’ compensation insurance sounds simple in theory, but there is a lot you need to know to implement it successfully. Laws differ from state to state, and every small business is unique in terms of the way they organize it.
So to help you better understand what workers’ compensation insurance is, what are its benefits, and how to apply for it, read our short primer on the topic below.
What Is Workers’ Compensation?
Workers’ compensation (or workers' comp) is an insurance that provides medical help and wage replacement to employees.
The beneficiaries of workers’ compensation insurance give up their right to sue employers for work-related injuries. In return, they receive guaranteed coverage when they suffer from workplace hazards. Employees also receive compensation for lost wages because of time spent away from work.
Otto von Bismarck pioneered the system of workers’ compensation in 1881 in Germany. It served as a model for modern systems of workers’ compensation. By 1949, all US states have a workers’ compensation system in place.
Is Workers’ Comp Mandatory?
Most states legally oblige employers to purchase workers’ compensation insurance for their employees.
One of the rare exceptions to the rule is the state of Texas, which allows employers to opt-out of workers’ compensation insurance.
The legislation also differs depending on the size of your business. Large organizations can self-insure, i.e. pay claims directly to employees in case of injury. Small businesses must apply for workers’ compensation insurance from an insurance provider.
Failing to implement a workers’ compensation policy is a serious crime, and as an employer, you’re at risk of suffering fines and punishment, including imprisonment.
Who Provides Workers’ Comp Insurance?
Small businesses can purchase workers’ compensation insurance from private insurance companies, or some state-level institutions.
Private insurance companies reserve the right to set the insurance premium based on industry, claim history, and other factors. Workers’ compensation insurance is usually purchased separately from other forms of insurance.
The premium you pay for insurance depends on the occupational hazards your employees are likely to encounter. Workers in industries such as construction or mining often require you to pay a higher premium.
What Does Workers’ Comp for Small Business Insurance Cover?
Workers’ compensation insurance covers a variety of workplace injuries and conditions.
Workplace accidents that lead to physical injuries are the most common case. The employee will have their medical expenses covered. They might also get a part of their wages back while recovering.
Occupational illnesses are another common situation where employees are eligible for insurance. These include things like carpal tunnel syndrome, which is prevalent among office workers.
Sometimes, injuries can lead to a permanent disability. Besides covering medical bills, the worker is eligible to receive a part of their wage for a time even if they are unable to work anymore.
Finally, if an employee dies of an injury sustained at work, their significant others are eligible to receive compensation in their stead.
What Does Workers’ Comp Not Cover?
There are several instances where employees are not eligible for workers’ compensation.
One example would be injuries outside of work. If an employee suffers an injury during their commute, they are typically not eligible for workers’ compensation.
Another example would be injuries that result from violations of company policy. If an employee intentionally uses equipment improperly, they might lose their workers’ compensation.
Who Benefits From Workers’ Comp?
Both small businesses and their employees stand to benefit from workers’ compensation insurance.
For small businesses, workers’ compensation insurance offers a way to evade costly litigation processes. Employers can settle their disputes with employees informally by administrative law judges.
For employees, workers’ compensation provides another layer of safety at the workplace. Workers that have guaranteed insurance in case of an injury will trust their employer more.
Third-party contractors are typically not covered by workers’ compensation. However, sometimes, the state may rule that employers have to ensure contractors have some other form of insurance coverage.
Executives and other C-suit individuals don’t fall under workers’ compensation, but they can opt-in if they choose.
Undocumented immigrant workers can sometimes be eligible for workers’ compensation insurance. States like Arizona, California, and Hawaii explicitly allow undocumented workers to benefit from workers’ compensation.
How Much Does Workers’ Compensation Insurance Cost
The price of a workers’ compensation insurance policy can differ based on your industry, company structure, and location.
Small businesses typically pay around $3000 annually. You can expect to pay more the higher your payroll is.
Another thing to consider is costs relating to deductibles, the costs of handling claims, and the costs of reporting to the insurance provider.
Small businesses looking for affordable solutions should look into pay-as-you-go schemes, as these are more cost-effective than policies where you have to pay up-front.
Some insurance providers offer discount rates for businesses that implement workplace safety best-practices.
Workers’ Compensation Insurance for a Safer Workplace
Small businesses face many challenges because of their size.
They often can’t afford to provide perks such as extensive retirement plans or comprehensive health insurance. But thanks to workers’ compensation, they can still offer their employees worthwhile benefits.
Workers’ compensation insurance for small businesses is essential for generating workplace satisfaction. Apply for a workers’ compensation policy today and give your employees a reason to stick around for the long haul.
Contact us in case you need a quality protection package. Stay on the safe side!