Workers’ compensation insurance for small business

What is workers' compensation and why is it important?

Workers’ compensation is insurance that provides benefits, such as medical care and compensation for lost income, to employees who suffer an accidental injury or occupational disease on the job. It’s important because it helps safeguard employers from the financial consequences of a workplace injury or illness – regardless of who is at fault. In most states, it’s also the law.

What is the difference between general liability and workers' compensation insurance?

General liability insurance may cover losses to property or physical injuries caused to third parties by an employer’s business operations, products or employees. Workers’ compensation insurance, in contrast, helps protect employers and employees if a workplace accident or illness occurs.

What does workers' compensation insurance cover?

Employees may be eligible for workers’ compensation if they suffer an accident or injury while working. Illnesses that occur as a result of exposure in the work environment may also be covered by the employer’s policy.

What doesn't workers' compensation insurance cover?

Accidents, injuries and illnesses that occur outside of the workplace, as well as health conditions that existed prior to employment, are generally not covered by workers’ compensation.

Are contractors and volunteers covered under workers’ compensation?

Employers may be responsible for covering independent contractors, unless the contractor provides written proof of workers’ compensation insurance, i.e., a certificate of insurance issued by the carrier who issues the policy (or the carrier’s authorized representative).

Does workers' compensation insurance help cover fatal accidents?

Yes, death and funeral service benefits may be paid to eligible dependents after a work-related illness or injury results in an employee’s death. These benefits can vary based on the workers’ compensation policy.

Does workers' compensation protect against employee lawsuits?

Workers’ compensation helps protect employers from lawsuits brought by employees who suffer a job-related injury or illness. Liability coverage may also be part of a workers’ compensation policy. It typically includes:

• Protection from lawsuits brought by outside individuals or companies that may be adversely affected by an injury to a worker
• Policy limit pay outs – per employee, per injury and per illness
• Coverage of legal fees, court costs, damages and settlements

Is workers’ compensation insurance required by law?

Regulations vary by state, but most states require employers to purchase workers’ compensation insurance if they have one or more employees. Failing to comply can lead to civil fines and criminal penalties. In some cases, the state may even shut down the employer’s operations.

Which professions need workers' compensation insurance?

In states with mandatory coverage, employers generally must purchase workers’ compensation once they hire their first employee, regardless of their profession. In states with elective coverage, workers’ compensation may be optional for some employers based on their type of business or their employee head count. Employers should check with their state for specific requirements.

Do self-employed business owners and independent contractors need workers’ compensation insurance?

Workers’ compensation generally isn’t required for independent contractors, but regulations do vary by state and industry. Consult a licensed insurance agent to better understand your unique business requirements.

How can small business owners save money on workers' compensation insurance?

Premium payment programs can help small business owners better manage their cash flow. With these plans, employers pay their premiums over the term of their policy, rather than upfront. The premiums are also calculated using real payroll data and carrier rates, not estimates, which can help minimize over or underpayments at year-end audits.