The benefits of workers’ compensation insurance far outweigh its cost. Do you need workers’ compensation insurance? The answer may be more complex than you realize.

For example, do you need to cover remote workers? Do you need workers’ comp benefits for part-time employees? What about subcontractors who work for you?

Small business owners know how to prevent injuries at work. Still, accidents happen. And that makes workers’ compensation insurance one of the most important types of business insurance.

What Is Workers’ Compensation Insurance?

Also known as workman’s comp, workers’ compensation insurance is coverage for employees if they are injured or become ill at work. In the majority of states, small businesses are required to have it if they have employees.

Why You Should Take Out Workers’ Comp Insurance

Let’s say you’re a small business owner from Texas. Workers’ comp insurance isn’t required there. In Arkansas, if you have fewer than 3 employees, you don’t need it. In Alabama, it’s required if you have 5 or more employees.

No matter what your state requirements are, you should take out workers’ compensation insurance to protect your business:

• An employee who is injured or becomes ill at work can sue you, seeking lost wages and payment of medical expenses
• For the same reason, you should cover part-time workers and subcontractors. Nothing would prevent them from suing you for lost wages and payment of medical bills should they become injured or become ill at your business. You can add them to your workers’ compensation coverage package. It’s your safety net against legal costs and the costs of medical treatment.
• In most states, workers comp is required for businesses, even if there is only one employee.
• Even if your workforce no longer works at the business, you need to cover remote workers. Remote workers are doing tasks related to their jobs during work hours and need coverage.

What You Need to Know about Workers Compensation and Remote Workers

As a small business owner with remote workers, you need to take steps to make sure their work environment is safe. Increasingly, an insurance company may require you to make a physical inspection of the remote employee workplace before providing workers’ compensation coverage.

The most common workers’ compensation claims reported by remote workers are slips, trips, and falls. They also report ergonomic injuries due to the poor designs of workstations.

As the manager or boss, you should take steps to be sure the workplace of the remote worker is safe and ergonomically correct. Although they are working remotely, you are required to carry workers’ compensation insurance for them.

What Does Workers Compensation Insurance Cover?

Why do you need a worker’s compensation policy? In most states, workers’ compensation laws require that you provide it as business insurance.

Here’s what the workers’ compensation system covers:

Medical Expenses

An insurance company helps cover medical expenses associated with workplace injuries. The workers’ comp benefit helps cover medical bills and expenses related to employee injuries or workplace accidents. Coverage will include medical care, physical therapy, and ongoing support.

Lost Wages

Workers’ comp coverage will provide the injured party with lost wages, similar to long-term disability benefits.

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Death Benefits

If an employee dies due to a work-related injury, accident or illness, the workers’ comp insurance policy will pay death benefits.

Injuries and Illness to Employees While at Work

Injuries and Illness to Part-time Employees and Subcontractors

Check with your insurance company to see if you can purchase coverage and add part-timers and independent contractors to your workers’ comp policy. It adds a level of financial protection to your business in the event a worker becomes ill or injured on the job while at your job site.

What is Not Covered by Workers Compensation Insurance?

Commercial general liability insurance, general liability, professional liability insurance, a business owner’s policy and property insurance cover your business and its products or services.

What does worker’s compensation cover? Workers’ compensation coverage is for employees while they’re working. At other times, they’re covered by health insurance.

Unique events can happen in the workplace – and away from the workplace. Some things just aren’t included under workers’ compensation coverage.

• COVID-related illnesses and medical costs – Check with your insurance company and state. During the pandemic, coverage was expanded to include COVID-related illnesses, especially for front-line workers such as nurses, doctors and emergency personnel (police, fire). In most states, the time frame for that coverage has ended. Normally – not during a pandemic – “routine commonly spread illnesses” aren’t covered. That’s because it’s tough to prove where and when the employee got the illness.
• Part-time employees and subcontractors aren’t covered unless you specifically add that coverage. Only Arizona precludes businesses from adding those classes of workers to the coverage for a workplace injury or illness.
• Injuries that happen at work functions, such as a softball game or picnic, if participation is voluntary. (If you want workers to be covered at work functions, state it in writing that attendance is mandatory.)
• Injuries that occur, such as a fight between two employees that happen for personal reasons not related to work.
• A work-related injury or illness or work-related accident that takes place because an employee is intoxicated or under the influence of illegal drugs. Of course, it should be company policy that employees are not permitted to be at work under those conditions. A signed agreement of that should be in your employee files.

How Much is Small Business Workers Comp Insurance?

You may be able to “umbrella” workers’ compensation insurance under your business owner’s policy. There are several factors that alter the workers’ compensation insurance cost – payroll, type of work performed, and claims history.

For example, typically, the cost is $1 to $1.56 for every $100 of (gross). That cost varies by state and can change annually. The type of work is part of the calculation, using 700 class codes for types of jobs. Those two factors are calculated. Then, the total will be multiplied by 1 to calculate workers comp costs, if you’ve had no claims. The multiplication factor will change based on your number of claims.

Workers Compensation Insurance Requirements in the U.S.

Laws vary but in general, you’re required to get workers’ comp insurance if you have employees. There are some exceptions, as previously noted. If you’re required to obtain workers comp and you don’t, you could face felony criminal charges.

How to Get Small Business Workers Compensation Insurance

You can set up and purchase workers comp insurance online, with just a few clicks.

1. Check the requirements in your state and start coverage with the first employee you hire if required.
2. Network with other business owners to get recommendations.
3. Choose an insurance company that provides broad coverage in the business insurance world, and is experienced with worker compensation coverage.
4. Get a workers’ compensation quote from several carriers and review the options.
5. Make a choice and enroll in a policy.

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