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What Is Workers Comp, and Do You Need it for Your Business?

What Is Workers Comp, and Do You Need it for Your Business?

It is the responsibility of the employer to provide a safe working environment for their employees. However, even in the safest workplaces, accidents can still happen.

Almost all states across the country require employers to carry worker’s comp insurance to cover damages resulting from work-related injuries or illnesses. In this post, we’ll take a look at what workers’ comp is and why you need it for your business.

What Is Workers Comp?

Workers compensation is a government-mandated compensatory system that ensures workers get compensation for damages resulting from work-related injuries or illnesses. Workers’ comp laws can vary from state to state; however, most states require that every business owner or employer carry worker’s compensation insurance. Speaking to your lawyer can help you get employee law advice and understand the specific requirements in your state to ensure your business stays compliant.

What Does Workers’ Comp Insurance Cover?

The specific situations that workers’ comp insurance covers may depend on state laws within which the business operates. However, there are general similarities in the type of benefits victims of work-related injuries or illnesses may be eligible to collect, including:

  • Medical costs. Workers’ comp insurance cover ensures that employees recover the cost of treating work-related injuries or illnesses.
  • Temporary disability benefits. These are benefits paid to help workers recover a percentage of their lost wages if an injury temporarily robs them of the ability to work.
  • Permanent disability benefits. These are benefits paid to workers who suffer injuries or illness that permanently robs the employee of their ability to work. These benefits provide the injured worker with a source of livelihood until the worker attains retirement age.
  • Death benefits. In the unfortunate event that a work-related injury or illness results in the death of one of your employees, the victim’s family and dependents are entitled to compensation.

You may need to have a workers’ comp cover if your business meets the following criteria.

Your Business Has Employees

If you have employees, it is always a good idea to carry workers’ compensation insurance to cover your business even when the laws in your state don’t make it mandatory. This ensures that you do not have to pay for worker damages out of pocket in the event of an accident, which can be quite costly. In some situations, you may be required to carry workers’ comp insurance even if you do not have employees, but you intend to enter into contracts and business agreements with other businesses.

There Are Rampant Occupational Hazards Associated with Your Type of Business

Different working environments have varying hazards associated with them. If your type of business is prone to accidents or illnesses, carrying workers’ comp cover can keep you safe from costly lawsuits that result from work-related injuries or illnesses.

The Laws of Your State of Operation Make it Mandatory to Carry One

Ensure that you understand the laws around workers’ compensation in the state your business operates from. Some states make it mandatory that all employers carry a workers’ comp policy, while others have a set number of employees above which employers must carry one. Understanding the laws in your specific state can help you ensure your business is compliant and avoid potential government fines.

What Is not Covered under Workers’ Comp

There are some exemptions to the types of injuries covered by a workers comp insurance policy that every business owner must be aware of. Some of the exemptions include:

  • Injuries sustained while not on the job
  • Self-inflicted injuries
  • Injuries resulting from a violation of your company policy
  • Injuries sustained during the commission of a crime

Having workers’ comp insurance ensures that your business is covered against possible lawsuits resulting from occupational injuries or illness. However, it may not be sufficient to protect against all lawsuits. You can talk to your lawyer to help you know how to best protect your business in all scenarios before embarking on hiring employees.


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by Brian Perry // Brian Perry is a contributor to Businessing Magazine.

Opinions expressed by contributors are their own.