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Why Your Small Business May Need Workers’ Compensation Insurance 

As a small business owner, you face an important decision — does my business need workers’ compensation insurance?


Workers’ compensation coverage protects you in most cases if your employees sue you for negligence. For example, if you fail to furnish adequate safety equipment, your employee is usually barred from suing you if you have workers’ compensation insurance. If you have coverage, employees waive their right to sue their employers for negligence unless there is extraordinary neglect. Therefore, many insurance experts refer to workers’ compensation as the “Grand Bargain.”


Workers’ compensation coverage provides a variety of benefits


Workers’ compensation insurance is a liability policy that offers your employees state-mandated benefits. Your general liability policy, which could protect you if a customer falls in your location, for example, excludes coverage for employee injuries.


Here are important coverages your workers’ compensation policy provides.


  • Medical treatment after an injury or illness, including emergency room treatment

  • Ongoing medical care post-injury or illness

  • Lost wages, usually about two-thirds of your employee’s average weekly or monthly wage, capped at state-mandated limits

  • Funeral expenses

  • Certain survivor benefits, including support for the surviving spouse or children

  • Payment for permanent disability or physical impairment

  • Payment for disfigurement when applicable


Without workers’ compensation coverage, you could be responsible for these payments.


Even employees who are 1099 may be owed workers’ compensation benefits when injured


One mistake many business owners make is calling their employees independent contractors when in fact a labor law judge may decide they are employees. If that happens, you can be caught without the proper coverage if you don’t have a workers’ compensation policy.


Even if you don’t have any employees, you may be eligible for workers compensation insurance.


Let’s say you’re a small artisan contractor who designs, builds and installs custom cabinets. You lease a workspace, and your family depends solely upon your income. What would happen if a cabinet fell, and you suffered a severe back injury? How would you put food on the table, pay your bills or provide for your family?


Properly crafted workers’ compensation coverage can pay your medical bills, lost wages and any permanent disability associated with your mishap.


How much does workers’ compensation coverage cost?


Insurers rate workers’ compensation coverage using class codes assigned to the type of work performed by your employees. Those class codes, your workers’ compensation claims history and your payroll costs determine your rate. 


How to learn more about workers’ compensation coverage


As a Trusted Choice Independent Insurance Agent®, we are trained professionals who can help you determine if you need workers’ compensation coverage. After assessing your operation, we  can recommend an insurer appropriate for your company’s organizational needs.

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