Workers’ compensation insurance

Workers' compensation insurance, sometimes called industrial insurance, covers costs related to workplace injuries and illnesses, which can escalate quickly due to the high cost of medical care.

While workers’ comp laws vary by state, small businesses typically need a policy in place as soon as they hire their first employee (or a certain number of workers).

Even when not required by law by your local Department of Labor or other governing body, this policy provides important protection against healthcare expenses and employee lawsuits related to workplace injuries, such as a slip and fall in the office, an injury from tools or machinery, or an occupational illness.

You can also rely on workers’ comp if an employee needs medical treatment or time off due to a workplace injury – or if an injured employee sues you for failing to prevent an accident.

If you don’t carry workers’ comp insurance, your business will be responsible for any medical bills and legal fees. Most states levy costly penalties for noncompliance.

Each state has unique workers' compensation laws and penalties, which are usually set by a state workers' compensation board.

In most states, workers' comp is required as soon as a business hires its first employee. Other states don’t mandate coverage until a business has two, three, four, or more employees. There are sometimes exemptions for certain types of workers and business structures – such as real estate agents and agricultural workers.

Subcontractor coverage requirements vary by state, but many businesses choose to get workers' comp regardless to navigate the potential risk to all employees.

Texas and South Dakota are the only states where business owners are never required to purchase workers’ compensation insurance coverage.

All other states impose penalties for not carrying workers’ compensation. These can range from fines to jail time – or both.

Most states allow business owners to buy workers’ compensation insurance from private insurers or use self-insurance plans. North Dakota, Ohio, Washington, and Wyoming require employers to purchase workers’ comp insurance through a state fund.

Typically not by law. States generally require businesses with employees to purchase workers' compensation insurance.

But sole proprietors, independent contractors, single member limited liability companies (LLCs), and other self-employed business owners with no employees may buy this policy to fulfill the terms of a contract.

Your clients don’t want to deal with the expense and hassle of a workplace injury. That’s why they might require contractors who work for them to carry their own business insurance, including workers' comp.

Some states, such as California, require businesses engaged in hazardous work to have workers’ comp coverage for all individuals, regardless of whether they are sole proprietors or independent contractors.

Workers' comp can also help protect your income. Most health insurance policies exclude coverage for work-related injuries and illnesses, so if you carry workers' comp as an independent contractor, your medical bills will be covered when you’re injured on the job.

Additionally, workers' comp can partially replace wages lost while taking time off to recover from a work-related injury.

Yes, most workers’ compensation policies include death benefits. These help a deceased employee’s loved ones and dependents pay funeral and burial costs after a fatal workplace accident.

Workers’ comp can also provide financial assistance for the deceased employee’s family.

In many states, yes. Most workers’ compensation policies include employer’s liability insurance to protect your business if an injured worker files a lawsuit against you for not preventing a workplace accident.

However, business owners in North Dakota, Ohio, Washington, and Wyoming do not have employer’s liability insurance included in workers’ comp.

These states are known as the four monopolistic workers' comp states, in which workers' comp coverage must be purchased from a state fund, and does not include employer's liability coverage. Insurance providers sell stop gap coverage to protect you from employee lawsuits.

To save money on workers' comp, it's important to make sure you classify your employees correctly. Employees with desk jobs or other jobs with a low risk of injury cost less to insure.

By ensuring each worker is properly classified as either a contractor or an employee (full-time or part-time), and listed under the appropriate class code, you can save money and avoid potential legal action.

In some cases, small business owners can choose to buy pay-as-you-go workers' compensation. This type of workers' comp policy has a low upfront premium, and lets you make payments based on your actual payroll instead of an estimated payroll. It's useful for businesses that hire seasonal help or have fluctuating numbers of employees.

In addition, some business owners may be eligible for a minimum premium workers' compensation policy, which sets your premium charges at the minimum premium (i.e., the smallest amount of money that an insurance company will sell to a business). Small businesses that benefit from this type of policy often have few risks and a small number of employees.

Finally, businesses with a good Experience Modification Rating (EMR) and a documented safety program can help lower workers' comp costs. A safer workplace means fewer accidents, which helps keep your premium low.

Both policies deal with bodily injuries. General liability insurance protects your company when a client or another third party suffers an injury on your property and sues for medical expenses.

Workers’ comp insurance covers expenses resulting from employee injuries sustained while working.

Learn more about the difference between general liability and workers’ compensation insurance.

It typically depends on where an employee contracted COVID.

Workers' comp insurance protects employees from on-the-job injuries and illnesses. If an employee is exposed to the coronavirus because of their job, then this policy should provide coverage.

For example, a nurse caring for sick patients or a grocery store worker who deals directly with the public would both have a stronger claim than an office worker. Workers’ comp doesn't cover diseases unrelated to employment.

Your state's laws could potentially help cover costs related to COVID-19. If you think you might be eligible for a workers' compensation claim, contact your insurance agency’s claims department.

If you want to learn more about this policy, you can find additional answers in our frequently asked questions about workers' compensation insurance.

If there are any additional questions you have about coverage, you can also contact an Insureon agent.