Is your business at the point where you’re ready to hire employees?
You’ve probably heard that you’re going to need workers comp insurance. There are a lot of misconceptions about workers comp insurance for small business. Many mistakenly believe that liability insurance covers everything, including employee injury expenses (it doesn’t).
Many small business owners aren’t sure if they need it when they need it, and how much it costs. How can you be sure that your business is protected?
Read this guide to find out everything you need to know about workers comp insurance.
What Is Workers Comp?
Workers comp is a shortened way to say workers compensation insurance. This is insurance that employers buy to protect the business and employees.
If an employee is injured while performing regular job duties, the employee can’t sue you or your business for damages. Workers compensation insurance steps in and covers the expenses that occur as a result of the injury.
The types of expenses that workers compensation insurance covers include lost wages, medical, physical therapy, or other rehabilitation expenses.
The exact list of expenses that workers compensation covers will depend on the state. It’s important to note that these programs are mandated and run by state governments, usually state department of labor.
It doesn’t matter who was responsible for the incident. As long as the injury occurred on the job, workers comp will cover the expenses.
When Do You Need Workers Compensation Insurance?
Your business needs to have workers compensation insurance if you have one or more employees. That’s not an arbitrary thing. It’s the law in every state, only Texas doesn’t legally require that.
If you’re self-employed and getting ready to hire your first employee, you need to have a policy in place before the new employee’s first day on the job.
Waiting to get insurance until day 1 can be detrimental. That employee could get injured, leaving you open for lawsuits and financially responsible for that employee’s medical bills.
That’s not an ideal way to start off with a brand new employee.
Do Independent Contractors Need Workers Comp Insurance?
You may be in a situation where you don’t want to hire employees, but you have independent contractors.
This is a common scenario, with millions of people joining the ranks of independent workers. In this scenario, small business owners are not required to provide workers compensation coverage to contractors.
A growing trend among businesses is to wrongly classify workers as independent contractors instead of employees. Employers are doing this more often as a way to avoid payroll taxes and buying workers compensation insurance.
This may be a tempting route to take to save a few bucks, but it’s not worth it in the long run. There are major consequences to pay when misclassifying workers.
The IRS will come after you and you’ll have a PR disaster on your hands.
I’m Self-Employed – Do I Need Workers Comp?
You might be wondering if you need workers comp insurance if you’re self-employed. Technically speaking, you are an employee of your company.
Your situation is closer to that of an independent contractor because you’re likely to contract with other companies for work.
In that case, you are responsible for getting your own insurance. It’s considered to be a business or a personal policy. In some states, they will let you get a workers compensation policy if you’re a sole-proprietor or a partner in a small business.
If this is the policy you need, make sure that you get a policy that covers lost wages, disability, and medical expenses.
How Are Business Owners With Employees Covered?
Now, if you’re a business owner and you have employees, you can elect to cover yourself with workers compensation insurance.
You can also remove yourself from the policy and only have workers compensation insurance cover your employees.
How to Get Workers Compensation Coverage
Now that you know the role that workers compensation plays in your company and the requirements, how can you get started?
These are the steps you should take to get workers comp for your business.
Check Your State’s Requirements
You’ll want to brush up on the requirements for your state. You’ll also want to understand what expenses are covered if you have you get coverage from the state.
Your Business Needs
You need to take the steps to evaluate your business needs. How many employees do you plan to hire? Take a look at the typical job duties they’ll do, the size of your payroll.
This information will impact your premium. The more risk there is or the higher salary an insurance company will have to cover, the higher your premiums will be.
Find a Provider
Workers compensation insurance is a policy that’s overseen by states. Yet, you may not work directly with states to purchase an insurance policy.
There are private providers like this workers compensation provider that offer insurance programs. These providers often offer better rates.
Private companies may reject your application because they don’t work with certain industries. If you have a hard time getting coverage from private companies, you may be able to get coverage from your state.
Before you settle on an insurance program, you’ll want to evaluate the different programs. You don’t want to base your decision based on price alone.
Instead, look at the big picture. Yes, look at the premium, but also look at the scope of coverage. Make sure you are certain that the coverage fits your business needs.
You don’t want to be stuck making payments on medical bills that you thought workers compensation would cover. You also don’t want to leave your employees in a difficult financial situation.
Workers Comp Insurance for Small Business
Small business insurance isn’t easy to understand. Workers comp insurance for small business is even more confusing.
States have their own requirements, and you need to find out what your state requires and what’s covered.
When you’re ready to hire employees, make sure you have the right policy in place when they start working.
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