If you own a business, you may have asked, "Why is workers' compensation important?" when building your business insurance policy. Having workers' compensation insurance is important for a few key reasons. Without this coverage, your business could face hefty financial losses, lawsuits, and even state penalties.
Fortunately, a local independent insurance agent can help your business get set up with all the workers' comp required. They'll get your company matched to the ideal amount of coverage for your unique industry and number of employees. But first, here's a breakdown of why workers' compensation is important.
The Benefits of Workers' Compensation for Employers
Having workers' comp can benefit your business in several ways. Here are the three major reasons why having workers' compensation is important for most businesses.
Workers' compensation is usually required by law
In most states, having workers' compensation insurance is usually required. If your business has any employees, it's likely required by state law to carry workers' comp.
However, there are limited exceptions to state workers' comp laws, including for various industries and for businesses with only certain types of employees. For example, in many states, construction businesses and businesses that only hire family members or seasonal employees aren't typically required to offer workman's comp. You'll need to review your specific state's workers' comp rules and regulations to ensure you meet local mandates.
Workers' compensation protects your employees
If any of your employees get injured, ill, or develop a disability due to their routine job tasks or the work environment, workers' comp can help compensate them for medical expenses. Workers' comp can reimburse affected employees and businesses for necessary medical bills and treatments, prescription medication, rehabilitation costs, and lost wages during time off work.
Policies typically can replace up to two-thirds of an employee's standard pay while they're off work recovering. Workers' comp can also provide disability benefits if an employee develops a disability due to their job, such as from repeated motion over time, like loading and unloading heavy inventory. In the extreme case of an employee's death due to their job, workers' comp can provide death benefits to a beneficiary.
Workers' compensation protects your business
Without workers' comp, your business could have to pay for employee medical treatments, etc., out of its own pocket. If an incident occurred that led to an employee injury or illness, your company's group health insurance plan wouldn't cover the medical expenses if the diagnosis was caused by job duties or the workplace.
An employee's private health insurance likely wouldn't cover work-related injuries or illnesses, either. Your business could be on the hook for expensive medical care for its employees and the cost of hiring new talent if it needs to replace an affected worker. It may also be vulnerable to lawsuits.
Often, providing workers' comp insurance exempts your business from employee lawsuits for covered incidents, such as workplace injuries or illnesses. This means the affected employee or their family members are not allowed to sue your business for the incident.
Having workers' comp can help your business save tens of thousands of dollars or even more after just one workplace accident. It can also help your business avoid state penalties for not carrying the required coverage.
Penalties for Non-Compliance with Workers' Compensation Laws
If your business is required by your state to carry workers' comp and you fail to provide coverage, you could be subject to harsh penalties. Often, these penalties include state fines, jail time, or a forced suspension of business operations. Your business may be fined a certain amount for every day it's found to have not offered coverage when it was required to.
The business owner may also face a jail sentence or be ordered to close their business for a short period of time. Workers' comp non-compliance penalties vary by state and the severity of the offense.
How Does Workers' Comp Work for Employers?
Workers' compensation can cover claims of employee injury, illness, disease, disability, or death caused by job duties or the workplace. To be covered, an incident must have occurred due to hazards present in the work environment or because of a job task.
For example, if an employee suffered a deep laceration due to a sharp edge on a table in the office, workers' comp could cover the claim. Another example is if an employee suffered from a crushed foot due to a heavy object falling off of a shelf.
What's Not Covered by Workers' Comp?
Workers' compensation won't cover any injuries or illnesses that occurred due to anything other than a workplace accident or another work-related incident. If an employee was diagnosed with a disease that couldn't be traced back to their job in some way, they'd need to go through their personal health insurance to receive compensation because it wouldn't be covered by workers' comp.
This coverage also typically won't cover claims stemming from intentional acts by employees, such as injuries sustained on purpose or incidents that occurred if an employee was intoxicated or failing to follow proper workplace procedures. Review your specific workers' comp policy's exclusions together with your independent insurance agent to be certain of what's covered and what's not.
Workers' Compensation Exemptions
In certain cases, your business may be exempt from local workers' compensation requirements. Your business may not be required to carry coverage if it is an LLC or sole proprietorship.
It may also not be required to carry coverage if you have fewer than a certain number of employees, such as only one or two, or if your employees are part-time or seasonal. Businesses in certain industries may also be exempt from coverage requirements. It's critical to be aware of the exemptions specific to your state to avoid penalties for non-compliance.
An Independent Insurance Agent Can Help You Find the Right Workers' Comp
When it's time to find the right workers' comp insurance for your business, no one's better equipped to help than an independent insurance agent. These agents have access to multiple workers' comp insurance companies, so they're free to shop and compare policies and rates for you.
They'll get you matched to a policy that offers the best blend of coverage and cost. And down the road, your agent will still be there to help update your coverage as your business's needs evolve and can even file workers' comp claims for you.
Sources
https://www.employers.com/blog/2016/three-reasons-why-you-need-workers-compensation-insurance/
