What is Workers’ Compensation Insurance?Workers' Compensation insurance (also known as Workers’ Comp or Workmans’ Comp) helps protect your business from the costs associated with a work-related injury or illness. Typically, it would pay for medical bills and recovery costs, as well as some of the missed wages. In the event of a death, Workers’ Compensation insurance can help with the costs of the funeral or death benefits to the employee’s family. Workers’ Comp can also help cover legal expenses if an employee sues the business over an injury that isn’t covered by the policy.
Am I Required to Have Workers’ Compensation Insurance?Nearly every state in the U.S. requires you to carry Workers’ Compensation insurance; most require it as soon as you hire your first employee (sometimes even part time or temporary employees). That being said, each state’s stipulations are a bit different, so make sure you view our state guides: Workers’ Compensation Laws and Regulations by State.
Even when insurance is not required by law, we strongly encourage you to carry Workers’ Comp if you have any employees at all because you’re still liable for the cost of workplace injuries, which can be substantial. According to the National Safety Council, the average occupational injury or death costs $33,355. According to the Bureau of Labor Statistics, the median days away from work due to a non-fatal occupational injury/illness is 8 days.
Is Workers’ Compensation Insurance Worth It?Absolutely! Workers’ Compensation is a liability insurance that directly benefits your employees. As your employees are the backbone of your business, it’s important to protect them. Not only is it the right thing to do, it protects your business, as well. Being hit with pricey medical costs and/or lawsuits could bankrupt your business if you don’t have insurance coverage.
What Does Workers’ Compensation Insurance Cost?Don’t you hate when somebody answers your question with “it depends?” Well, then you’re not going to like this… it depends. Rates vary from state to state, and the factors include:
- State laws: Each state has its own requirements for Workers’ Comp. Some states may even dictate coverage requirements.
- Industry: Certain industries present a higher level of risk for insurance companies than others.
- The kind of work your employees do and the related risks: Just like industry, some types of work are inherently more dangerous. A team of accountants is much less likely to have an occupational injury than a team of roofers. With a greater risk of injury, it may cost more to insure with Workers’ Comp.
- Number of employees: More employees means there’s a higher probability that someone will experience a work-related injury or illness.
- Size of your payroll: Since Workers’ Compensation helps pay an employee’s wages while they’re unable to work for a work-related injury or illness, higher wages usually mean higher Workers’ Comp costs to cover lost wages.
- Your history of claims: If you have a history of having Workers’ Compensation claims, then an insurance company has to presume that you will continue to have similar claims and therefore it makes you a bit more risky to insure.