Most businesses with more than one employee are required to carry workers' compensation insurance policies, although regulations can vary by state and type of business.
For example, sole proprietorships do not require coverage as they have no employees and are not required to cover themselves. However, once someone else is hired, a workers’ compensation policy is needed.
In some cases, corporate officers may be able to opt out of coverage, and certain employees, based on wages or hours worked, may be exempt. Businesses may also qualify for religious exemption in some cases.
Since requirements differ, business owners should work with an experienced insurance broker to determine what coverage they need, which employees qualify for coverage and what policy is the best fit.
What does workers’ compensation cover?
Workers’ compensation typically applies when an employee experiences a job-related injury or illness reports it on time, and they seek medical treatment.
Coverage may include:
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Medical benefits: Doctor or hospital visits, surgery, medications, physical therapy or rehabilitation sessions, and medical equipment related to the injury or illness.
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Lost wages: A partial amount of an employee’s wages if they are unable to work.
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Death benefits: Financial support for family or dependents and funeral expenses in the event of a fatal workplace injury.
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Employer liability protection: Protection against employee lawsuits related to workplace injuries.
Employers should clearly communicate how to report injuries and file claims and maintain proper documentation throughout the process.
What happens if I don’t have workers’ compensation coverage?
The penalties for not carrying workers’ compensation coverage can be very serious, including large fines, potential jail time, and even closure of the business, depending on state regulations.
The lack of liability protection may cause a business to face direct liability for medical costs and lost wages, as well as increased risk of lawsuits. Workers’ compensation insurance is the sole remedy for work-related injuries and ensures the injured worker is taken care of while offering protection for employers against legal action for most work-related injuries.
Get covered
Because not all workers' compensation programs are the same, owners should work with a trusted partner, like the experts at First National Insurance Agency, to secure the appropriate coverage. With the right advisor, businesses can develop a customized workers' compensation strategy designed to stabilize costs, enhance profitability and provide appropriate coverage to employees.
Frequently asked questions (FAQ)
- Is workers’ compensation required for all businesses?
- Most businesses with employees are required to carry workers’ compensation insurance, but requirements vary by state and business structure.
- What injuries are covered by workers’ compensation?
- Workers’ compensation typically covers injuries or illnesses that occur as a result of job-related duties, and in most cases regardless of whether the employee was at fault.
- Does workers’ compensation cover lost wages?
- Yes, most policies provide partial wage replacement if an employee cannot work due to a covered injury or illness and are subject to state-specific waiting periods before partial wages begin to be paid or become retroactive.
- What happens if a business does not have workers’ compensation insurance?
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Workers' compensation is often referred to as the sole remedy as it provides a means of recovery and wages for the injured employee and insulates the employer from legal action and damages that would otherwise be provided under the workers compensation laws of that state. Employers would be responsible for medical bills and lost wages, as well as being subject to additional fines and penalties that could include both civil liability and criminal charges.
- Do I need workers’ compensation insurance for 1099 employees?
- Generally, no; however, state agencies may view contractors as employees, and depending on the contractual agreement and who is directing the work, a 1099 could be viewed differently. Some states also require coverage for contractors in high-risk industries, such as construction.
- What if I subcontract some of my work out?
- You should thoroughly evaluate all subcontractors and have contractual language in place requiring the necessary insurance coverage specific to their scope of work, and obtain a certificate of insurance evidencing coverage. However, in the event you hire a subcontractor and they do not carry workers compensation insurance, that risk can shift to you. If one of the uninsured subcontract employees is hurt, they could seek coverage under your workers compensation benefits, your insurance carrier could treat the subcontractors payroll as part of yours and charge additional premium at audit, and you could be subject to additional legal expenses.
