Workers' Comp Insurance
Workers’ compensation insurance covers costs related to workplace injuries and illnesses, which can escalate quickly due to the high cost of medical care.
While workers’ comp laws vary by state, small businesses typically need a policy in place as soon as they hire their first employee (or a certain number of workers).
Even when not required by law, this policy provides important protection against medical expenses and employee lawsuits related to workplace injuries, such as a slip and fall in the office, an injury from tools or machinery, or an occupational illness.
You can also rely on workers’ comp if you or an employee needs medical treatment or time off due to a workplace injury – or if an injured employee sues you for failing to prevent an accident.
Small businesses find workers’ comp essential for three reasons:
- Most states require workers’ comp coverage
- It covers medical expenses and partial lost wages due to a job-related injury
- Most workers' comp policies also cover the cost of employee lawsuits related to a work injury
Medical expenses
Workers’ compensation insurance covers the cost of immediate medical care for workplace accidents, such as ambulance rides, emergency room visits, surgical procedures, and other medical bills. Ongoing care, such as medication and physical rehabilitation, is also covered.
Disability benefits
A serious injury can prevent an employee from returning to work for days, weeks, or even months. Workers’ comp benefits cover part of the wages lost while an employee is recovering from a workplace injury or occupational illness.
Compensation for fatal injuries
When a work-related incident is fatal, workers’ compensation pays death benefits that cover funeral expenses and help support the deceased individual’s family members.
Lawsuits related to workplace injuries
Workers’ compensation insurance typically includes employer’s liability insurance. This type of insurance protects employers from lawsuits related to work injuries.
For instance, a worker might claim that a lack of basic workplace safety led to their injury. If the worker sues their employer, this coverage would pay for:
- Attorney’s fees
- Court costs
- Settlements or judgments
Injuries caused by intoxication, drugs or company policy violations
If an employee is under the influence of alcohol or drugs and gets injured due to intoxication, workers’ compensation benefits would not apply.
In addition, if an employee does not follow company policies, such as wearing a hard hat when working with heavy equipment, and hurts themselves, they are not entitled to workers’ compensation benefits.
Injuries claimed after firing or layoff If an employee gets injured or makes claims of injury after experiencing a termination (including being fired or laid off), they are not eligible for workers’ compensation benefits.
A worker must be an active employee at a company in order to receive workers’ compensation coverage.Wages for a replacement worker
If your employee is unable to work due to injury and you have to bring on a replacement worker, workers’ compensation would not cover the replacement worker’s salary. The injured employee would still be entitled to wage loss benefits.OSHA fines
OSHA requires workplaces that operate heavy machinery, such as manufacturers, to follow set safety guidelines. In the event that an employee gets injured for not following OSHA safety procedures, the company may receive non-compliance fines that would not be covered by workers’ comp.Every state has different requirements for workers’ compensation insurance. In California, workers’ compensation is mandatory for all employers, even if the company only has one employee.
California law requires a business owner to carry workers’ comp insurance for employees who regularly work in California, even if the business is headquartered in another state.
Do you need workers’ compensation if you are self-employed?
Sole proprietors and independent contractors should strongly consider buying workers’ comp even when it’s not required. Even if you may be exempt from purchasing by law, should you get injured on the job, this policy can help pay your medical expenses and provide part of the wages you lose while recovering.
Your personal health insurance provider might deny a claim if your injury is related to your work, which would leave you paying these bills on your own.
Roofers and others in a hazardous line of work may be required to carry workers’ comp, even if they don’t employ anyone else.
Whether or not you’re able to get workers’ compensation depends on the type of business and the ownership structure. Regardless, if you’re self-employed, it’s a good idea to check with the California Department of Industrial Relations to determine what your rights and liabilities are so that you can be sure that you’re properly insured.
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