As a small business owner, one of the more confusing things you have to navigate is insurance. It can be challenging to figure out what kind of insurance you require and how much coverage you need, and when it comes to worker’s compensation insurance, each state has its own unique rules and regulations. Before you dive too deep into researching insurance providers and policies, you may want answers to the questions that many small business owners ask:
Do I Need Workers’ Comp Insurance and General Liability Insurance?
Because both workers’ compensation and general liability insurance both deal with injury, there’s often confusion over what each insurance type covers and if any overlap exists between the two. In actuality, workers’ comp and general liability insurance have nothing to do with one another and serve completely different purposes.
General liability insurance applies when your business causes injury to a customer or client. For example, if a customer comes into your store, slips, and falls, general liability insurance would cover their medical costs and legal fees that you accrue.
On the other hand, workers’ comp insurance covers medical costs if an employee suffers an at-work injury or illness. Workers’ comp does not cover injury to customers or clients, and depending on your policy, it may not cover you as the business owner.
What does the law say about workers’ comp and general liability insurance? Although there are exemptions for certain types of workers, every state but Texas requires businesses to have workers’ comp coverage. General liability insurance isn’t mandated, but it’s highly recommended.
Can I Purchase Coverage from the State?
Many states offer a state run fund for workers comp insurance, which can be either monopolistic or competitive. If a state has a monopolistic state fund, you can only purchase workers’ comp through that fund, not private providers.
On the other hand, states with competitive funds allow private companies to sell workers’ comp insurance plans. In turn, it creates a competitive market in which business owners shop around for the best coverage and price.
How Does Workers’ Comp Work for Independent Contractors?
Hiring contractors can save your business a lot of money, and makes sense in industries that rely on manual labor or short-term projects. However, hiring contractors gets a little tricky when it comes to workers’ comp coverage.
In many states, business owners can exempt independent contractors from worker’s comp coverage because they’re considered self-employed. Under these circumstances, many independent contract workers purchase coverage for themselves.
In other states, employers legally have to include independent contractors on their workers’ comp policies. Before bringing on any 1099 employees, make sure you understand your state’s specific laws regarding employee classification and coverage requirements.
Can an Employee Sue for an Injury if They’re Covered by a Workers’ Comp Policy?
As a general rule, no, employees cannot sue their employer for an on-the-job injury if they have proper workers’ comp coverage. By accepting employment and the offered insurance, employees forgo their ability to sue given workers’ comp will pay for their injury-related expenses. However, there are exceptions if the employer breaches the law or shows gross negligence.
Are Return-to-Work Programs Required?
Return-to-work programs are not legally required for any business; however, many employers create these plans to support their employees and save money. Return-to-work programs help boost morale, reduce an injured employee’s time off work, and help them maintain their occupational skillset.
Does Workers’ Comp Cover Off-Site Injuries?
If an employee sustains an injury while performing their work-mandated duties, they can receive workers’ compensation, regardless of where the injury occurred. For example, if an employee running a delivery injures themselves while lifting a heavy packing, workers’ comp will apply.
How Can I Reduce What I Pay for Workers’ Comp Insurance?
Making your workplace as safe as possible is the best way to reduce your costs. Because a business’s experience modifier (their claims history) impacts their premium, having fewer injuries will, in time, reduce workers’ comp insurance costs.
To create a safety-first environment, you should hold regular training sessions, ensure proper functionality for all machinery, and strictly enforce workplace conduct rules.
Workers’ Comp Basics
When launching a small business, everyone has questions, especially when it comes to insurance coverage. While important and necessary, workers’ comp insurance isn’t as complicated as you might initially think. Just be sure to consult your state laws and take the time to compare coverage details and rates before settling on an insurance provider.
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