Workers' Compensation

Insurance Education for On-the-Job Protection

Workers’ compensation insurance protects a business owner from the employer's statutory obligation to provide coverage for its employees who experience a work-related injury or illness on business premises or due to business operations. Nearly all U.S. states require employers to purchase a workers’ compensation insurance policy to cover employees. The law provides workers' compensation as the sole remedy for an injured employee. Check with your state insurance department to understand what is required for your specific business type.

Typically, workers’ compensation covers an injured employee’s medical expenses, rehabilitation costs and lost wages. Workers’ compensation insurance premiums are set by insurers. For a new business, premiums may be based on broad factors such as total company payroll, number of employees, earnings per employee and type of work performed. For an established business, workplace safety history also is a contributing factor to costs.

Workers’ Compensation Insurance Tips and Considerations

• New businesses typically can secure worker’s compensation insurance through any insurance agent or broker who handles business insurance, or through a direct writer of insurance. For information about specific providers in your state, contact your state insurance commissioner.
• Many states require business owners to carry workers’ compensation insurance on all employees including family members and on themselves if they are considered company employees. This requirement may apply regardless of the number of hours worked.States often have exeptions for very small businesses or corporate officers. Be sure to check with your state insurance department to be sure you are in compliance.
• Make sure you understand the definition of “employee.” In some states, the workers’ compensation definition of an employee is as broad as “every person in the service of another under any contract of hire, express or implied, oral or written." Exceptions to this definition may include salesmen who work on commission, drivers who lease their vehicles on a fee basis, independent contractors, private-home domestic workers, farm workers and unpaid volunteers. However, home-based business owners should be aware there are instances in which you may be held liable for a contractor injured while working on your property.
• If your company does not carry workers’ compensation and an employee is injured on the job, your business may be liable for all related expenses. You also may face fines and penalties for noncompliance. You would also lose the protection from a lawsuit specified in the workers compensation law.

In addition to higher premiums, employers operating without workers’ compensation may be subject to fines and/or penalties. For workers’ compensation insurance rules and information specific to your state, contact your state insurance commissioner.