Small Business Brief

Safety & Loss Prevention

Workers’ Compensation Insurance: 10 Things Every Business Owner Must Know

There are over 30 million small businesses in the United States and millions more medium and large sized businesses.

While different companies have different needs based on their niche and size, the vast majority share one thing in common…

They need to carry worker’s compensation insurance in order to operate legally. So if you’re without worker’s compensation, it’s important to get it fast.

Worker’s compensation is a type of insurance that provides employees with a safety net if they’re met with adversity during work hours.

Below, our team breaks down what worker’s compensation does, what it doesn’t do, and other facts that business owners should be aware of.

1. Carrying Worker’s Compensation Is a Requirement

All states require that employers carry some form of worker’s compensation.

Where states vary is in regard to the amount of coverage that must be carried. Laws also vary regarding which classes of workers get covered under worker’s compensation, which injuries get covered, and the time period in which claims can get made.

It’s important that you meet with an attorney to deduce what your legal obligation is under worker’s compensation statutes. Never assume that laws are the same from state to state.

2. Worker’s Compensation Insurance Covers Employees That Get Injured at Work

For the uninitiated, worker’s compensation is commonly applied when an employee gets injured at work. Therefore, claims are very common in high-risk fields.

With worker’s compensation, employees can take the time they need to recover from injuries without worrying about pay.

3. Worker’s Compensation Insurance Can Also Get Leveraged For Illnesses and Rehab

Many businesses don’t know that worker’s compensation is also helpful when an employee becomes ill. If for any reason the illness is tied to work responsibilities (breathing in noxious chemicals for example) worker’s compensation can get tapped into the same way it would be used for any standard injury.

Furthermore, worker’s compensation can also help cover costs for rehab (physical therapy).

4. If You Don’t Have Worker’s Compensation, You Could Get Fined and Sued

Violating worker’s compensation insurance requirements could get you fined by the government. Even worse than fines is the legal trouble you may find yourself in with employees.

Injured employees that can’t collect worker’s compensation will sue you for damages. Given your being out of compliance with the law by not having worker’s compensation, employees will likely win their cases.

The amount you’ll need to pay in legal costs will be far in excess of what your insurance premium would have been.

5. Worker’s Compensation Pools Get Managed by the State

The state you operate in manages the worker’s compensation cash pool. Consequently, when claims get made, checks will get issued by the state.

Certain professions have their worker’s compensation insurance managed by the federal government. These professions include federal professions, longshoreman, and coal miners.

6. Not All Workplace Injuries Get Covered Under Worker’s Compensation

Injuries that are sustained under certain circumstances may void employee’s worker’s compensation rights.

Some of these circumstances include injuries that are sustained while committing a crime. They also include injuries that are self-inflicted and injuries that occur due to intoxication.

7. In Some Cases, Employees Will Falsify Worker’s Compensation Claims

While rare, some employees incorrectly report injuries they sustained outside of the workplace as workplace injuries. They do this to illegally collect worker’s compensation benefits.

It’s important that all injuries get documented and investigated to suss out the possibility of insurance fraud.

Insurance fraud is a crime and employees found committing it could face jail time.

8. Contractors Do Not Quality For Worker’s Compensation

Private contractors do not qualify for worker’s compensation benefits. Therefore, you could circumvent worker’s compensation by forgoing employees.

It’s very important that you work with a legal team when classifying your workers. One misstep and you may have a lawsuit on your hands.

9. Employer Penalties for Worker’s Compensation Fraud Can be Severe

Businesses have classified their organizations incorrectly. They have lied about worker classification. They have even lied about their workforce numbers.

All of these fallacies are committed to dodge paying worker’s compensation insurance premiums.

If you’re found doing this, you could end up paying steep fines and may even get prosecuted criminally.

Learn more about worker’s compensation requirements and how to get coverage to ensure you’re in compliance.

10. 3% of Employees Sustain a Workplace Injury Every Year

According to OSHA, 3 out of every 100 employees will sustain an injury at work. With odds like that, it’s not a matter of if one of your employees will get hurt, it’s a matter of when.

This is particularly true if your business operates in the following niches:

  • Construction
  • Fishing
  • Roofing
  • Flying

Don’t forgo worker’s compensation insurance. If adversity strikes and you don’t have a policy in place, you’ll find yourself in deep trouble.

Wrapping Up

Worker’s compensation insurance protects employers and employees from the effects of workplace problems. We hope that our write-up above has impressed upon you the importance of carrying it.

Remember, our points are general. Your state’s specific worker’s compensation requirements may differ from what we’ve mentioned.

Discuss what your obligations are with your attorney. Make sure that your business is always in compliance with local insurance statutes.

Are you looking for more information on how to run your business better? If so, we recommend checking out more content on Small Business Brief.

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