As a small business owner with an office compromised of in-office employees, telecommuters, and remote workers, you’re probably wondering—how does workers’ comp insurance for small businesses work? Do I even need it?
The simple answer is yes, you need it. But, there’s a lot more to small business workers’ comp insurance than you may realize. So, consider this article your guide to the ins and outs of workers’ comp for small business owners.
Keep reading to learn more.
Workers’ Comp Insurance for Small Businesses
The term “small business” really isn’t all that relative. In fact, it doesn’t necessarily matter whether you run a big business or a small business. When it comes to workers’ compensation, as long as you have an office space or storefront filled with employees, you need the insurance.
So, how does it all work? All of your basic questions and more will be answered below. However, if you’re on the hunt for workers’ comp insurance, make sure you speak with a professional so that all of your bases are covered.
What Exactly is Workers’ Compensation?
If you own a business or a workspace, you’re expected to take care of your employees, especially when an accident happens on the premises. Workers’ compensation insurance is there to help take care of employees that suffer work-related injuries or illnesses.
For example, if one of your employees slips and falls and ends up in the hospital, the workers’ comp will kick in so that they can get any medical care that is needed. It also acts as a wage compensation—usually only up to a certain percentage—in the event that any work-related accident or illness prevents them from coming back to work.
Notice how we keep sating “work-related accident or illness”. This is because it doesn’t matter who is at fault, as long as the incident happens at work. This would also include separate work locations under your business’s name as well as any work vehicles that you may supply.
Workers’ comp isn’t just there to protect your employees, it’s there to protect you and your business as well. In exchange for the benefits of having this compensation insurance, your employees waive their legal right to sue you if an accident should occur.
Am I Required to Have Workers’ Comp Insurance?
Workers’ comp is regulated by each individual state.
However, not all states require business owners to have this insurance. Of course, if your state requires you to purchase workers’ comp and you fail to comply, you risk paying medical expenses for your employees out of pocket. You also risk getting sued and getting hit with penalties exacted by the state.
States also typically exclude certain types of workers from workers’ comp insurance. For example, seasonal or casual workers, farmers, and domestic workers such as housekeepers, babysitters, etc. For domestic workers, however, most states may limit the number you’re allowed to hire. They also have to keep under 40 hours per week—otherwise, you’ll have to cough up that compensation insurance after all.
While this varies from state to state, the rule for independent contractors does not. If you hire independent contractors (or freelancers), you are not required to cover them. This also holds true for sole proprietors who are self-employed, partners, or limited liability company members—unless they hire employees that are not considered as owners.
How Do I Get Workers’ Comp Insurance?
Workers’ comp insurance is typically purchased as a separate policy from a separate insurer. It’s important to note that this is different from your liability insurer. Each state will determine whether that insurance comes from state funding or a private company—or both.
Some states only offer state-funded insurance, otherwise, they’re competitors with private companies. Of course, in states that have both options, state-funding is a good back-up if you’re unable to purchase the compensation from a private insurer. The main difference between the two is that state-funded insurance will cover you regardless of your type of business.
To get workers comp insurance, you’ll want to go through either an agent or a broker. An agent represents one company, while a broker represents you and does all of the insurance quote gathering, questioning, and applying on your behalf. Either type of professional should be able to walk you through the process and make sure you get everything you need.
You’ll also have to make sure you have all your financial records, business records, and employee information in order. This will determine the type of policy you’re able to get.
How Much Will it Cost?
Your workers’ comp insurance premium also varies by state. It also depends on a few factors, including:
- How much the state workers’ comp is willing to offer in terms of benefits
- The size of your employee payroll
- The industry category that your business falls under
- How many claims have been entered in the past by employees/employers
- The number and type of employees you have
It’s safe to say that it’ll be much more expensive to cover employees in the more hazardous occupations such as construction—compared to covering those who work behind a desk. But the costs don’t end with just your premium, they also include any payments made under deductibles, administrative costs associated with handling and reporting claims with the state and the insurer.
Get Workers’ Comp Insurance Today
Just remember, workers’ comp insurance for small businesses is just as necessary as it is for larger businesses. Not having this type of insurance means not having any protection for you or your employees—so don’t wait for an accident to happen.
Get a free quote online or speak with a professional broker today about the type of workers’ comp insurance policy you can get for your small business.