As a small business owner, you may face an important decision \u2014 does my business need workers\u2019 compensation insurance? Your state\u2019s department of insurance sets the rules for which employers need workers\u2019 compensation and which do not. In some states, hiring just one employee, even a part-time worker, means you must purchase a workers\u2019 compensation policy.<\/p>\n
Workers\u2019 compensation coverage protects you in most cases if your employees sue you for negligence. For example, if you fail to furnish adequate safety equipment, your employee is usually barred from suing you if you have workers\u2019 compensation insurance. If you have coverage, employees waive their right to sue their employers for negligence unless there is extraordinary neglect. Therefore, many insurance experts refer to workers\u2019 compensation as the \u201cGrand Bargain.\u201d<\/p>\n
Workers\u2019 compensation insurance is a liability policy that offers your employees state-mandated benefits. If your employee becomes ill from an industrial exposure or suffers an on-the-job injury, the industrial laws of your state, which are referred to in your policy, outline the benefits the adjuster pays your employee. Your general liability policy, which could protect you if a customer falls in your location, for example, excludes coverage for employee injuries.<\/p>\n
Here are important coverages your workers\u2019 compensation policy provides.<\/p>\n
\u00a0<\/em>Medical treatment after an injury or illness, including emergency room treatment<\/p>\n Without workers\u2019 compensation coverage, you could be responsible for these payments.<\/p>\n \u00a0<\/strong>One mistake many business owners make is calling their employees independent contractors when in fact a labor law judge may decide they are employees. If that happens, you can be caught without the proper coverage if you don\u2019t have a workers\u2019 compensation policy. Additionally, as a sole proprietor, you may believe you are ineligible for workers\u2019 compensation coverage. In fact, many insurers welcome sole proprietors in their workers\u2019 compensation programs.<\/p>\n Let\u2019s say you\u2019re a small artisan contractor who designs, builds, and installs custom cabinets. You lease a workspace, and your family depends solely upon your income. What would happen if a cabinet fell, and you suffered a severe back injury? How would you put food on the table, pay your bills or provide for your family?<\/p>\n Properly crafted workers\u2019 compensation coverage can pay your medical bills, lost wages, and any permanent disability associated with your mishap.<\/p>\n Insurers rate workers\u2019 compensation coverage using class codes assigned to the type of work performed by your employees. Those class codes, your workers\u2019 compensation claims history, and your payroll costs determine your rate.<\/p>\n Let\u2019s suppose you run a busy fast-food operation with five employees. Your business has a general code for a retail establishment, then a class code for all your employees. Your state\u2019s department of insurance assigns a rate based on the hazard involved for that worker. If that rate is $1.25, your insurer would take all the payroll, including overtime and bonuses, paid to those employees, divide it by 100 and multiply it by that $1.25 rate.<\/p>\n If you pay one worker $23,000 per year, the insurer will calculate your premium as follows.<\/p>\n $23,000\/100 = $230 X $1.25 = $287.50 premium for that employee.<\/p>\n Your state sets rates, often aided by the National Council on Compensation Insurance (NCCI), an advisory organization that sets rates for 35 U.S. states. Non-NCCI states often rely on NCCI for their rates, then adjust them up or down based on several factors.<\/p>\n Different rules may apply if you have employees who work in uncommon places. For example, the federal U.S. Longshore and Harbor Workers’ Compensation Act (LHWCA) protects those who work near navigable waters, and federal laws can affect people employed on military bases.<\/p>\n Your Jason Herman Insurance agent is trained to help you determine if you need workers\u2019 compensation coverage. After assessing your operation, your agent can recommend an insurer appropriate for your company\u2019s organizational needs.<\/p>\n","protected":false},"excerpt":{"rendered":" As a small business owner, you may face an important decision \u2014 does my business need workers\u2019 compensation insurance? Your state\u2019s department of insurance sets the rules for which employers need workers\u2019 compensation and which do not. In some states, hiring just one employee, even a part-time worker, means you must purchase a workers\u2019 compensation policy. Workers\u2019 compensation coverage protects … <\/p>\n\n
Even 1099 Employees May be Owed Workers\u2019 Compensation Benefits\u00a0<\/strong><\/h2>\n
How Much Does Workers\u2019 Compensation Coverage Cost?<\/strong><\/h3>\n
Unusual Circumstances<\/strong><\/h3>\n
Learn more about workers\u2019 compensation coverage<\/strong><\/h3>\n