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What SMEs Need To Know About Workers’ Compensation Insurance

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Small business or SMEs often overlook the need for adequate insurances. This is due to their focus on investing any spare cashflow and capital in growth strategies. There are also a lot of different types of insurance so it can become overwhelming when you’re told you need separate business insurance policies for everything. Therefore, if you’re not sure what to do with Workers’ Compensation insurance for your staff – read one. In this article we provide a broad overview of what it is and why your business probably needs it!

Workers’ Compensation Protects Your Business

Accidents can happen in the workplace, even when businesses are careful and safety-conscious. Three million workers were injured while on the job in 2014, so work injuries are commonplace and they can happen to workers in any business.

Workers’ compensation insurance ensures that employees who suffer job-related injuries and illnesses receive the medical care they need.

Irrespective of who’s at fault for the accident, workers’ comp. will kick in if an employee is injured, while on the job.  There is a trade-off however,  employees have limited rights to sue their employers for these injuries or illnesses.

Workers’ Comp Insurance May Not Be Mandatory

In some states workers’ compensation insurance is not mandatory, but that does not mean that you should not purchase it. When an accident occurs and there’s an injury, your business could be up for the costs and maybe a lawsuit.

In states where it’s mandatory your business could face stiff penalties if it doesn’t have adequate cover.

State laws vary on coverage requirements depending on the type of business, number of employees and the type of business. Some states may exclude certain types of workers and their law covers:

· Which injuries are covered
· How injuries are evaluated
· How medical care is delivered
· The extent of the benefits the employee may receive

Workers’ Comp. Insurance Managed at State Level

It’s usual practice for businesses to take out a specific workers comp policy. Each state will determine whether the policy is provided by the state, private insurers, or both.

How the states differ is there are five states and two U.S. territories that require employers to obtain coverage through state-operated funds. These states include: Ohio, North Dakota, U.S. Virgin Islands, Puerto Rico, West Virginia, Washington and Wyoming. If your company does business in any of these states, you will need to purchase coverage through a state-operated fund.

Some states will not require employers to have workers’ compensation insurance if employees are paid exclusively through commission. It’s important to check your local regulations to see how coverage is handled and exclusions that may apply to your business.

In states that allow policies from private insurance companies, it’s important to make sure that you choose a company with experience handling workers’ compensation claims.

Just like with any other insurance policy, premiums will depend on a number of factors, including your payroll and industry classification. Premiums for dangerous activities may be higher, but if your business operates in a risk-prone area, your premiums may also be higher.

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