Workers' Comp Insurance for Small Businesses

Businesses that rely on employees need the right kind of protection for their workforce. Without the right coverage, even a single employee injury or illness could result in significant costs for your company and its team. That's what makes having workers' compensation insurance crucial, even for small businesses.

Fortunately, a local independent insurance agent can help your business get equipped with all the workers' comp coverage it needs. They'll get your company matched to the appropriate amount of coverage for your industry. First, though, here's an overview of workers' compensation for small businesses, including what it covers and why it's necessary.

What Is Workers' Compensation Insurance for a Small Business?

Workers' comp insurance is a special type of business insurance coverage that can provide reimbursement for an employee's medical expenses, lost wages, disability, and death benefits if they suffer a work-related injury, illness, or death. 

This coverage is critical for protecting employees and the business financially after a serious injury, illness, or fatality impacts a worker. However, for an incident to be covered, it must have been caused by job duties or the work environment. 

Why Small Businesses Need Workers’ Compensation

The legal requirements for workers' compensation insurance vary by state, but most states require businesses with a certain number of employees to have coverage. Coverage requirements depend on location, industry, the number of employees, and the classification of those employees. Depending on the state, even part-time and seasonal employees can be covered by workers' compensation.

Typically, workers' compensation insurance becomes required when a business hires its first employee. However, certain states only require businesses to provide this coverage if they have at least three employees, for example. 

Additionally, certain industries, such as those in the agricultural sector, are often exempt from having this coverage. Businesses that only hire family members may also be exempt from coverage requirements.

Having the appropriate mandated amount of workers' compensation insurance helps a business avoid costly lawsuits filed by employees and their families for work-related injuries or illnesses. If a business provides workers' comp, its employees and their family members aren't allowed to sue for a covered incident. 

Further, a business that has the right amount of workers' comp can avoid costly state penalties, such as fines or temporary forced closures, for non-compliance.

Who Is Covered by Workers' Comp?

Workers' comp coverage generally applies to full-time and part-time employees. However, in some locations and industries, it can also apply to seasonal or temporary employees. Independent contractors and freelancers are usually excluded from workers' comp benefits unless contracts or state laws specify otherwise.

The Benefits Provided by Workers’ Compensation

Having the right amount of workers' compensation insurance can help a business avoid losses due to employee lawsuits and also avoid having to pay out-of-pocket for an employee's treatment and lost wages after a work-related injury or illness. 

Workers' comp provides coverage for the following:

• Medical treatment for work-related employee injuries or illnesses
• Compensation for an employee's lost wages during recovery
• Disability benefits if the injury causes a permanent disability
• Rehabilitation benefits, which can cover physical therapy, occupational therapy, and more, to help the employee recover and return to work
• Death benefits, such as funeral costs, if an employee dies because of their job

One of the major benefits of workers' comp is that a business is exempt from employee lawsuits, or those filed by their family members, if a team member gets sick, injured, or dies because of work tasks or the job environment. Injuries, illnesses, and fatalities can be covered if they occur at work or develop over time due to repetitive motion required by the job, such as from regularly loading and unloading heavy products.

State Laws and Requirements for Workers' Compensation

It's important to review and understand local laws regarding workers' compensation for your business. Coverage requirements, including who must be covered and the minimum coverage requirements, vary by state. 

While a small retail business with two employees might be required to have coverage in one state, the same type of business may only be required to have coverage if it has four or more employees in another state.

Be sure to work with a local independent insurance agent to determine exactly how much workers' compensation is required for your small business. Your agent knows your state's laws and regulations regarding workers' comp. They'll make sure your business gets set up with all the coverage necessary to comply with local laws and adequately protect your company and its team members.

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Cost Factors for Small Business Workers’ Comp Insurance

The average cost of workers' compensation for a small business is $45 monthly, or $542 per year. However, the cost of your business's policy can vary based on many factors. 

Workers' comp premiums can depend on the following:

• The number of employees
• The business's industry risk
• The business's location
• The business's claims history

Workers’ comp protects a business's finances from unexpected injury claims, lawsuits, and other losses. This can make the cost of the premiums well worth it. 

Further, considering the potential fines and other penalties a business can face if it fails to get the required amount of workers' comp, the cost of a policy can be much less expensive. An independent insurance agent can help you find affordable workers' compensation insurance for your small business.

Additional Coverage Options for Small Businesses to Consider

You might be able to save money on your workers' comp insurance if you bundle it with other types of business insurance through the same carrier. Consider adding the following types of coverage to complete your business insurance package.

• Businessowners policy (BOP) insurance: This provides a convenient package of general liability insurance, commercial property insurance, and business income insurance for small businesses.
• Umbrella insurance: This can extend your business's existing liability coverage in increments of $1 million to offer much greater protection against lawsuits.
• Commercial auto insurance: This protects your business's vehicles against the cost of accidents, lawsuits, theft, vandalism, and other threats.
• Cyber liability insurance: This protects your business against losses stemming from data breaches and other digital threats.
• Professional liability insurance: This protects your business against losses stemming from third-party claims of professional errors or omissions that cause harm.

Having all these additional types of coverage can offer your business broader protection against a myriad of common and unexpected risks. An independent insurance agent can help you assemble a complete small business insurance policy and apply any discounts you may qualify for to increase your premium savings.

Get a Quote for Workers’ Comp Insurance for a Small Business

When it comes to protecting small businesses against the cost of work-related injuries and illnesses to employees, no one's better equipped to help than a local independent insurance agent. These agents have access to all the best workers' comp insurance companies, so they're free to shop and compare workers' comp quotes and policy options to get you the coverage you need. And down the road, your agent can help you file workers' comp claims and update your coverage when necessary.