Does My Business Need Workers Compensation Coverage?

This is a common question that many entrepreneurs ask when establishing policies related to their business.  It comes as no surprise that, with everything you’ve invested in your business, you want to be able to protect yourself, your assets, your finances and your employees as much as possible.  But is workers compensation coverage something that you should worry about?

What Kind of Industry is Your Business In?

Workers compensation entitles an employee who is injured on the job medical coverage as well as monetary compensation in exchange for that employee waiving their right to sue the employer in a court of law. When it comes to whether or not such insurance is required, many people believe that worker’s compensation is something that is more relevant to some industries than other. It makes sense, too.

People who work in jobs where they are constantly lifting, moving, and operating heavy equipment are more prone to injury than those who spend their entire working day sitting behind a desk. Nevertheless, workers compensation is something that every business should have, even if the nature of your company’s work isn’t inherently dangerous. It doesn’t matter if the people in your office never lift anything heavier than an ink pen, accidents in the workplace don’t necessarily have to be related to the work that you do.

When asking yourself the question of “Does my business need workers compensation coverage,” there are several different factors that you have to keep in mind to ensure that the level or coverage provided by your worker’s compensation coverage is adequate enough to protect your company and your employees.

Let’s take a look at what you need to consider:

  • What you can afford – The kind of insurance that covers your business in case of an employee’s injury works much in the same way that your personal health insurance does.If you think that you can’t afford insurance, consider a basic policy that covers things like property and injury at a reasonable cost.  It should be noted that, like personal insurance, a higher deductible means lower monthly premiums and vice versa. Keep that in mind when you shop for a policy.
  • Take a look at your business and the risk associated with it – Anyone who asks “Does my business need workers compensation coverage,” should know that looking at the level of risk their company faces will help determine what kind of coverage would be ideal for their situation.From determining just what around your work environment can pose a threat to the safety of your employees to determining how you can treat and perhaps reduce that risk, it’s adamant that you keep such factors under constant review.

This is so that you never pay for more coverage then you need, and at the same time, you have enough to cover any possible mishaps.

  • What are the local laws? – Many states require companies to be covered some way, so the question of “Does my business need workers compensation coverage” then becomes a matter of how much you need. The law is different in each state, so you’ll have to contact your local insurance commissioner’s office to find out just what you need and how you can go about getting covered so that you, your company, and your employees are all covered in case something happens

It’s important to be covered for incidents that you couldn’t possibly foresee. Without workers compensation coverage, you open yourself up for lawsuits if someone happens to get injured on your company’s property.

Best case scenario: The ruling is in your favor, but you’ll still have lost money to attorney’s fees, and will have spent a large amount of time dealing with the issue.

Worst case scenario: a lawsuit from an injured worker brings about a number of costs that your company never fully recovers from.

When asking yourself “Does my business need workers compensation coverage,” take the time to think about what could happen without it and you’ll have your answer.

Remember, running a business successfully does not need to be complicated.  Keep it simple!

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4 thoughts on “Does My Business Need Workers Compensation Coverage?”

  1. My partner and I have a paint company. It just the two of us, we do not hire other workers. Do we need Workers Comp?

    • Great question! Each state has different laws regarding workers compensation coverage for business owners. Your CPA would be the best person to ask!

  2. What does a business need to have in place to get workman’s comp? Do the employees need to work a certain number of hours for them to be covered?

    • Kellee, thank you for the questions! The requirements vary by state. Please consult with your CPA for state-specific information.


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