There are numerous types of insurance for your small business, such as general liability & workers compensation insurance, umbrella insurance, and small group health insurance. Workers’ compensation insurance (also referred to as workman’s or workers’ comp) is one way that small business employers can help protect the people who work for them and their business from the costs associated with work-related accidents, injuries and illnesses. But how can you choose the best workers comp insurance for your small business, and what do you need to know about avoiding worker’s comp claims? 

Employers can adopt a number of safety measures to mitigate the risk of work-related injury or illness. But when such an incident occurs, workers’ compensation insurance provides some financial relief for the affected worker and the business. 

Workers’ comp insurance could protect your employees and your small business from financial bankruptcy in the event of a catastrophic illness or injury. Continue reading to find out if it’s necessary to have workers’ comp insurance for your small business.

What is workers’ compensation insurance for small businesses?

Put simply, workers’ compensation is an insurance program that provides benefits to employees who suffer job-related injuries and illnesses.

It may be helpful to understand workman’s compensation in the context of two other common types of insurance: small group health insurance and general liability insurance.

With some limits, an employee with a work-related illness or injury can get workers’ comp benefits regardless of who was at fault—the employee, the employer, a coworker, a customer, or some other party. Workers’ compensation insurance provides coverage when:

1. The employee is eligible for benefits
2. The injury or illness is work-related

In contrast, injuries or illness sustained by non-employees (such as customers or vendors) visiting the business are typically covered by general liability insurance.

Injuries or illness that befall an employee outside of work are typically covered by individual or small group health insurance. Consult eHealth to learn more about small group coverage. To illustrate:

• Workers’ compensation insurance would pay the medical bills incurred by a full-time employed waiter who slips on the wet floor in the restaurant kitchen.
• A restaurateur’s general liability insurance would pay the medical bills incurred by a vendor who slips on the wet floor in the restaurant kitchen while making a produce delivery.
• Health insurance would pay the medical bills incurred by the waiter if he slips on the wet kitchen floor at his home.

Why it’s important to have workers comp insurance for a small business

Worker’s compensation insurance can protect you and your employees against accidents, injuries, and illnesses. If one of your employees gets injured on the job, workers compensation insurance for a small business can help to cover those medical expenses. This can protect your company and your employee against unexpected expenses. In addition, workers comp insurance for a small business can protect you in the event of a lawsuit. You need to take a close look at the policies available, and make sure you select the best workers comp insurance for your small business. 

What injuries does workman’s compensation for small businesses cover?

Workers’ compensation for small businesses may cover injury sustained in the workplace or in the course of employment. A delivery driver injured in an auto accident while on the clock may qualify for workers’ compensation.

An employee’s injury need not be caused by an accident—like a fall from a ladder—to be covered by workers’ compensation, however. Workers’ compensation insurance also covers illnesses related to employment as defined by the state. A good example of this is lung disease that is scientifically linked to exposure to chemicals used on the job or particles that permeate certain work environments. Rules vary among states and industries.

Furthermore, many employees receive workers’ comp benefits for injuries resulting from overuse or misuse over a long period of time, such as chronic back pain.

Does workers’ compensation insurance pay costs other than medical bills?

Usually workman’s compensation pays costs other than medical bills. While specific coverage details may vary some by state and insurance policy, generally workers’ compensation insurance pays:

• Hospital and medical expenses necessary to diagnose and treat a work-related injury or illness
• Disability payments while an employee is unable to work (typically, about two-thirds of the employee’s regular salary)
• At least a portion of the cost for rehabilitation, retraining, and compensation for permanent injury
• Death benefits for the survivors of a worker killed on the job

What limitations and restrictions apply to workers’ compensation insurance?

Workers’ comp benefits may not pay the full billed amount for eligible expenses. Depending upon workers’ compensation plan, there may be caps in place for certain kinds of claims and cost-sharing arrangements, such as deductibles.

Generally, workers’ comp doesn’t cover injuries that happen because an employee is intoxicated or using illegal drugs. Coverage may also be denied in situations involving:

• Self-inflicted injuries (including injuries sustained by an employee who started a fight),
• Injuries suffered while an employee was committing a serious crime,
• Injuries that occurred as a result of an employee’s behavior that violated company policy,
• Injuries suffered while an employee was not on the job, and
• Injuries suffered when an employee’s conduct violated company policy

Who mandates workers’ compensation insurance for small businesses?

Unlike commercial general liability insurance, which is not required by law, state laws govern workers’ compensation insurance for small businesses. State laws vary, but an employer’s responsibility to provide workers’ compensation insurance usually depends on several factors:

1. How many work-comp eligible people the business employs
2. What type of business it is
3. What type of work the employees perform.

As a small business owner, must I have workers’ compensation insurance?

The law varies from state to state with regard to workers’ comp insurance so you will need to check your state’s requirements. Like group health insurance requirements, small business owners may be required by law to have workers’ compensation insurance, depending on the number of people they employ. The number of employees may be as low as 1 in some states. An eHealth licensed broker can help you determine whether you are required to purchase workers’ comp insurance in the state you do business in.

What type of employees “count” and don’t “count” toward meeting workers’ compensation insurance mandates?

In states that require businesses of certain sizes to carry workers’ compensation insurance, it’s important to consider the type of workers you employ. With few exceptions, most employees are eligible for workers’ comp benefits. Exceptions exist, however. And while types of workers excluded from workers’ comp benefits may vary some by state, they commonly include:

• Independent contractors
• Intermittent or seasonal workers
• Part-time domestic workers, such as maids and nannies
• Part-time gardeners or maintenance workers employed in the home to perform specific work
• Some agricultural workers.
• Business owners, sole proprietors, and partners (some states may allow optional coverage)
• Volunteers
• Relatives of the owner who work in the company.

How much does workers’ compensation insurance cost?

There are a lot of factors that will influence how much you have to pay for this policy, such as the coverage of the policy, the number of employees you have to cover, the industry in which you work, and your location. 

For example, if you work in an industry where your employees are prone to getting hurt, workers’ compensation insurance will probably cost more. Or, if you have to protect more employees, then your policy premium will probably be higher. If you are curious about how much you might have to pay for a policy, you should reach out to a professional on eHealth to learn more.

What is the best workers’ comp insurance for a small business?

The right policy for one company is not necessarily going to be the right policy for yours. You need to think about what type of coverage you need. For example, if you work in the biological sciences, you might need a policy that protects you and your employees against illnesses and injuries. Or, if you work in an industry that is particularly litigious, then you may need extra protection against lawsuits. Always consider what the policy offers against what you need. 

Are you ready to take the next step to meeting your company’s workers’ comp insurance needs?

If you own a small business, you probably need to budget for workers’ compensation insurance even if you have as few as 1 unrelated employee. You may also wonder if you should be investing in general liability and small group health insurance.

If you are interested in learning more about small group medical, general liability and workers’ compensation insurance, please contact us. Licensed insurance brokers at eHealth can help identify state mandates, when applicable, and guide you through your insurance options based on what you have to say about your business, its needs, and your risk-tolerance. Then your eHealth broker will help you find affordable insurance that matches your needs. Click this link to get started.

This article is for general information and may not be updated after publication. Consult your own tax, accounting, or legal advisor instead of relying on this article as tax, accounting, or legal advice.