For many new business owners, especially those who have never owned a business before, worker’s comp insurance may be a mystery. Many don’t know what it is, what it does, or why it is necessary. Below, business owners can learn how workers compensation insurance protects them, their staff and their investment.
The Basics of Worker’s Comp
Worker’s compensation insurance is a type of coverage that pays the rehabilitative and medical expenses for employees who are hurt while at work. It covers a portion of lost wages as well. In most cases, worker’s compensation insurance protects employers from negligence lawsuits. In return, the employee gets the reassurance of knowing they will be compensated fairly without having to take the case to court.
Why do Small Businesses Need Worker’s Compensation Coverage?
Small businesses should buy worker’s comp coverage because it’s required in most areas. Even in places that do not require it, customers may be reluctant to transact with businesses that don’t have it. Moreover, state penalties for failure to have adequate coverage can be very stiff. Requirements vary by jurisdiction; for instance, the self-employed and farm workers are exempt in some areas. The coverage isn’t provided by the state; it’s bought on the open marketplace, meaning that business owners can shop around to get the best price.
When Should the Coverage be Bought, and Is it Expensive?
In most areas, a business must buy workers compensation insurance as soon as it has an employee who isn’t a partner or the owner. The cost of the coverage is determined by state rules, but most use a specific formula as follows: 1% for every $100 in an employee’s payroll, multiplied by the business’ risk classification. The risk level is determined by the frequency of workplace injuries and the severity of such injuries. However, premiums can rise or fall depending on the business’ accident history, employer health insurance and various other factors.
Worker’s compensation insurance can protect employers and workers; it prevents employees from filing negligence suits after being hurt on the job, and it keeps workers from being forced to pay all of their post-accident medical bills. By buying enough coverage through website, business owners can remain in compliance with state law, and they can protect everyone involved.