Small businesses need insurance to cover various parts of their business. Unfortunately, you can’t buy a single policy that covers you entirely. You’ll have to take out several policies, and workers’ compensation is one of them. It’s important to understand how that works when getting started.
1. Full coverage with a workers’ compensation policy is vital.
Don’t skimp on coverage for your office just because you want to save a few bucks. If an employee is injured on the job, they deserve adequate compensation for their injuries. Full protection will ensure that you can pay their medical bills and avoid a personal injury lawsuit.
It doesn’t take much for an employee to be eligible for a claim. According to a North Carolina law office:
“The primary requirement for collecting benefits is that your injury or illness needs to have occurred while you were on the clock and performing the duties of your position, or it needs to have been directly caused by the conditions of your job.”
Accidents will more than likely occur on your premises, especially if you have warehouse workers or work in a high-labor industry. Even if your employees are office workers who sit all day, you may still have injury claims relating to carpal tunnel, neck injuries, or eye strain.
If you’re not properly covered, an employee may sue you for compensation. According to the National Council on Compensation Insurance, the average workers’ compensation claim in 2016 totaled more than $53,000, including indemnity claims and lost time from work. If you’re not properly insured, you’ll have to pay this out of your bottom line, which can hurt your small businesses.
2. It’s against the law to forgo a workers’ compensation policy if you have employees.
If you don’t have any employees, workers’ compensation is a non-issue for you. However, if you have one or more employees, 49 states require that you have adequate workers’ compensation policies to cover medical costs, lost wages, and pain and suffering if an employee is injured.
There are consequences for forgoing a policy. Along with being responsible for workers’ compensation claims out of your own pocket, you’ll also be subject to fines and penalties from your state. The government has your employees’ best interests in mind, so they take lack of adequate coverage very seriously.
If possible, you might consider hiring independent contractors rather than employees. Independent contractors are often more affordable and legally easier to handle because they do their own taxes, and you don’t have to cover them under a workers’ compensation claim. If you operate a business that allows for independent contracting, it’s a good option to avoid the expense.
There are also some exclusions to who must be covered by your workers’ compensation claims based on your state laws. For example, casual laborers who work for a very brief time might not qualify for compensation. Research your coverage requirements before taking out a policy, just in case it’s unnecessary.
3. Your policy can be pricey.
The median rate for workers’ compensation policy is about $2.04 per $100 of payroll. However, the online insurance company Insureon warns that “those numbers are deceptively simple: They encompass all types of jobs, which means they don’t reflect the variations within states that account for different risk levels.”
The actual cost of worker’s compensation claims will vary based on your location. However, policy pricing is typically dependent on the number of employees. Insurance companies see organizations with more employees as higher risk, so your costs will rise.
They’ll also consider the nature of the industry. Industries with more accidents, such as construction or factory work, will have higher rates than office work. Injuries can happen in offices, but they’re few and far between and usually minimal.
Insurance companies will also factor in the benefits from your state as well as past claims. As with all insurance companies, the more claims you make, the more your rates will increase.
4. You can bundle your insurance policies for better rates.
Just because you’re required to have workers’ compensation insurance doesn’t mean you have to over pay for it. You can work with insurance companies to create a rate that matches both your needs and your budget.
Many insurance companies offer bundled rates to help small businesses obtain the coverage they need. Consider getting your property, business liability, and worker’s compensation insurance from one place to simplify your bills and reduce your rates.
However, proceed with caution. According to a NerdWallet article, it’s not always cheaper to bundle insurance rates. A company that offers you low rates on one type of insurance likely can’t offer the same breaks on another. In some cases, it may be cheaper to shop around.
Workers’ compensation insurance is another step in getting your business successfully off the ground. Don’t stress the process of getting a policy. Once you understand the concept, you can sign up for a policy that’s right for both your business and your budget.