As a small business owner, you take great pride in your work and go above and beyond to create a safe environment for your employees. But even with stringent safety protocols and diligent training, workplace accidents can still happen.
So what do you do if one of your employees gets hurt on the job? How do you ensure they get proper medical treatment and compensation for lost wages? And what protects your business from potential lawsuits?
This is where workers' compensation insurance comes in. Read on for everything you need to know as a beginner.
What Is Workers’ Compensation?
Workers' compensation — often called workman's comp, workers' comp, or just work comp for short — is a state-regulated insurance system. It serves two key purposes:
- Providing medical expenses and lost wage benefits for employees injured in workplace accidents or who develop an occupational illness.
- Protecting employers from being sued by employees over those workplace injuries/illnesses.
In other words, workers' comp is a type of insurance that covers costs if an employee suffers a work-related injury or illness. It provides wage replacement and medical benefits in exchange for the employee's right to sue you over that incident.
Read more about what’s covered under workers’ compensation.
How It Works
If an employee gets hurt at work, the process typically goes like this:
- The employee reports the injury and you provide them with the necessary claims forms to file for workers' comp benefits.
- The claim is reviewed and either approved or denied by the workers' comp insurance provider.
- If approved, the injured employee begins receiving benefits to cover medical expenses and a portion of their lost wages.
- You work with the employee and their doctors on a treatment and return-to-work plan.
As long as the injury truly occurred in the scope of the employee's normal work duties, they receive these benefits on a no-fault basis. Meaning you as the employer are still covered regardless of whether the injury was your "fault" or not.
Is Workers' Comp Required for My Business?
In almost every state, employers are required to provide workers' compensation coverage for their employees. There are some exceptions for very small businesses with only a few employees, but regulations vary by state.
It's imperative that you understand your state's workers' comp rules and if you are legally obligated to carry this insurance or face potential penalties and fines.
How to Get Workers’ Compensation Insurance
If your state requires it, you'll need to purchase a workers' compensation insurance policy for your business. This can be purchased through:
- A private insurance carrier
- Your state's workers' compensation insurance program (for monopolistic states)
- Your payroll service company
Work comp insurance costs will depend on a variety of factors determined by the insurance company, such as:
- Industry risk: How hazardous are the jobs your employees perform? Jobs with higher injury risk, like construction, will have higher premiums.
- Payroll size: More employees means more risk, so companies with larger payrolls pay more.
- History of claims: If your business has filed numerous workers' comp claims in the past, your rates will increase.
Because insurance rates can vary substantially between insurers and are impacted by so many factors, it's best to get quotes from multiple providers. An independent insurance agent can help guide you through this process.
Staying Compliant
Simply having a workers' comp policy is not enough though - you'll also need to:
- Post required workers' compensation notices about employee rights and claims procedures
- Keep thorough records of all workplace incidents, no matter how minor
- Take steps to create a safe working environment and train employees on protocols
- Ensure you have the right workers' comp coverage classifications for each employee's job description
If you have contractors, freelancers or temps working for you, you'll need to confirm if they need to be covered as well.
At the end of the day, workers' comp is designed to be an affordable way to take care of your employees and protect your business interests at the same time. Sacrificing this insurance can leave you with costly medical bills, lost production time, potential lawsuits, and regulatory penalties.
While no business owner wants a workplace accident to happen, they are impossible to predict. Having the proper workers' compensation coverage ensures you're prepared to handle injuries properly and helps give your employees peace of mind that they'll be taken care of. With just a bit of due diligence on your state's laws, you can quickly check this crucial insurance protection off your list.
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We’ve helped thousands of small businesses get covered. Let us make the process easy for you. Get your workers’ compensation quote today.
