As an entrepreneur, do not make the mistake of thinking that your company is too small to need workers’ compensation insurance, also referred to as “workers’ comp”. First of all, unless you have less than five employees, you are probably required by law to obtain this coverage for your workers. Secondly, just one accident at your workplace could potentially bankrupt your business.
Maybe you think that there is nothing dangerous at your workplace, so there is not much cause for concern? Think again. The Bureau of Labor Statistics reports that 3.1 million workers report non-fatal injuries and/or illnesses every year across the country. The chances of one of these millions of injuries happening at your workplace is not at low as you may have initially thought. This coverage is also not that expensive, considering the safety net it provides.
What Does It Cover?
Workers’ comp covers damages caused by any injury, illness, loss of limb or loss of life that may occur at the workplace. This plan covers your entire staff, and also provides you with liability insurance in case your employee chooses to sue you for damages. If an employee is injured at the workplace, the insurance plan will cover the costs of your employee’s medical treatment, rehabilitation services, transportation expenses to appointments, and lost wages, as well as a flat sum for the a loss of limb or death. Obtaining this coverage prevents your business from being personally liable for all of these expenses.
How Are the Rates Determined?
Workers’ compensation rates are based on the job position or positions at your workplace. The Council for Compensation Insurance, Inc. has a list of over 100 different job categories. Your insurance adjuster will place each of your job positions into one of these categories and the rate will be based on that classification. Typically, the more hazardous the job duties are, the higher the workers’ compensation rates. This rate will then be calculated for every one hundred dollars of your payroll. It is possible to lower your rates by having fewer accidents and putting specific safety measures in place at the job site.
Tips for Finding the Right Carrier
There are many different companies on the market that offer workers’ compensation to both large and small businesses. The first thing you want to do is shop around and see who is willing to give you the best rates. Ask for a quote from several different companies before making your final decision. You also want to be clear about exactly what workers’ compensation expenses they are responsible for paying. Ultimately, you should not have to pay any out-of-pocket expenses when a worker is injured if you have compensation insurance.
While cost may be a determining factor as to whether you purchase workers’ compensation or not, you really should try to calculate if you can afford not to have this insurance. Just one accident can lead to hundreds-if not thousands-of dollars in medical expenses, not to mention lost wages.
Do yourself a favor and obtain this coverage of soon as possible. It will work to protect you and your employers, and prevent a huge out-of-pocket settlement to be paid by you.
NOTE: ActSeed thanks Nik Donovic for guest-authoring this useful post. Thanks, Nik!