Do I need Workers’ Compensation Insurance?

What is Workers’ Compensation Insurance?

Workers’ Compensation insurance is a type of insurance that protects business owners from incurring personal liability if an employee suffers a workplace injury. In most states, (49; with the exception of Texas) businesses are required to have workers’ compensation insurance if they have an employee(s). In a few states, there is a mandate for businesses to have workers’ comp insurance, even if they do not have any employees.

What Does Workers’ Compensation Cover?

Workers’ compensation insurance provides a variety of benefits to the injured worker. The insurance policy will cover:

  • Medical expenses
  • Travel expenses to and from the doctor
  • Lost wages
  • Death benefits
  • Funeral costs

Why do I Need Workers’ Compensation Insurance?

First of all, unless your business operates Texas, you are likely required to have workers’ compensation insurance. Even if you are not required to have workers’ compensation insurance, it is smart to do so. Without workers’ compensation insurance, you can be held liable for an injury suffered by your employee.

Sometimes, despite following safety regulations, things go wrong. The insurance policy provides your business something to fall back on if something does go wrong. If you do not have workers’ compensation insurance, you can be held liable for the damages suffered by the employee. This can include paying for their medical expenses, lost wages, travel to and from the doctor, pain and suffering, and more.

How Much Does it Cost?

Generally, the cost of workers compensation is a payment per $100.00 in employees wages. The amount you pay per $100.00 varies by state. For example, in New York, the payment per $100.00 is $1.41, but in Alaska the payment is $2.74 per $100.00. Another factor that weighs into the cost of workers compensation is the type of industry your business is in. Lower risk industries, like an office job or sales job, are going to have a lower rate. High risk industries, like construction or natural resource extraction, will have a higher rate.  

The cost of workers’ compensation has reached its lowest rate in 25 years. Many legislators are fighting the low rate. Judges are stating that the rewards are not enough to cover the medical expenses and the lost wages that an injury will cause. Recently, a Florida judge ruled that the benefits from workers’ compensation are not enough. The judge believes that if you are going to give up your right to sue your employer, you should be compensated accordingly, not at the rate of $1.27 per $100.00 (the rate in Florida).

If you would like to learn more about workers’ compensation insurance, talk to an insurance or business law attorney. They can help you navigate this tricky area of the law and make sure you are covered if someone has been injured on the job.