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What you need to know about workers’ comp as a business owner

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If you own a business of any type or size, you already know that to running a company, you have to pay great attention to laws and regulations concerning permits, insurance, employee rights, environmental standards, and more. Even if you run a small business, these needs can be overwhelming. With all this responsibility, it can be difficult to understand every legal aspect of running a business in great detail.

When it comes to properly insuring your business, you’ll have to take out a workers’ compensation policy. To protect yourself financially and to provide the best possible care for your employees, you should take the time to understand this type of insurance and shop around for the right insurance provider and policy.

Before making any decisions regarding workers’ comp insurance, it’s important to consider the following points:

What is Workers’ Compensation Insurance?

As an employer, you are responsible for securing a workers’ compensation insurance policy for your business. This insurance plan will cover medical bills if an employee is injured on the job. It also pays for disability wages to the employee while they recover and cannot work.

Why is workers’ comp insurance so important? Not only does it take care of the physical needs of your employees, but it protects you financially. Without insurance, you, the employer, would have to pay for your employee’s medical bills out of pocket should they be injured at work. If this were the case, many businesses would go bankrupt due to workplace accidents.

Does Your Business Need Workers’ Comp?

Almost every state in the U.S. requires companies to have workers’ comp insurance. These laws apply across industries, and they pertain to all businesses that have at least one employee. For more information, you can learn about workmans comp laws here.

As a business owner, are you protected by your worker’ comp policy? The answer to this question depends on the state you live in, your business’ ownership structure (sole proprietor, partnership, limited liability company, or corporation), and whether or not you choose to cover yourself.

Workers’ comp coverage is usually optional for business owners; you can opt to cover yourself and your employees or your employees exclusively. Although some states don’t require owners to have workers’ comp, your business partners may, especially if you work on-site in a high-risk environment.

Although there is a temptation to cut costs and not insure yourself as a business owner, you should weigh this decision against the risks. If your health care doesn’t cover work-related injuries, then you’ll have to pay out of pocket should you be injured on the job.

Are There Penalties for Not Having Workers’ Comp?

In many states, not having workers’ comp insurance is against the law. If found out, you will be liable for legal penalties, and you run the risk of financial ruin from being sued by an employee.

To comply with the law, be sure to research your state’s requirements thoroughly. Also, keep in mind that employees are not obligated to take a workers comp payout if they aren’t satisfied; they have the right to pursue the matter in court. To avoid the long, costly process of a court settlement, consult with your employees or union to ensure that they approve of your insurance policy.

Where Should I Get Insurance?

Workers’ comp coverage is usually separated from your business’ other insurance policies. Depending on the state in which your company operates, you can choose to use a state fund or a private insurer.

If you run a business in a state with a competitive insurance fund, you have the option to buy into it or to purchase your plan from a private insurance provider. Many businesses in high-risk industries opt for state-funded coverage. In other states, companies must get their workers’ comp insurance from the monopolistic state fund.

What Determines the Cost of Workers’ Comp?

Insurance providers base workers’ comp insurance premiums based on numerous factors, including the following:

  • Your industry classification code
  • Your payroll amount
  • How dangerous your business activities areā€”for example, a construction company will pay higher premiums than an office-based company
  • Your business’ claim history

Finding the Right Coverage

Now that you know more about workers’ comp insurance, you should be well-equipped to start shopping insurance providers. Be sure to pay attention to all details and features of each plan you consider, and keep your own interests and your employees’ well-being in mind.

Do you run a US-based business? How do you find your insurance?

Career CamelWhat you need to know about workers’ comp as a business owner

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