Many small business owners overlook workers’ compensation insurance as they focus on building their companies. This is a mistake that can prove costly over time. Cyberattacks can devastate small businesses, from losing customer trust to halting operations as employees struggle to access data and restore systems. But there are strategies you can implement to protect your business from these attacks.
It Protects You From Legal Liability
Carrying workers’ comp insurance for your employees is legally required in almost all states. But even if it weren’t, this coverage protects you from expensive lawsuits that could come about in the event of an injury or death. Plus, many companies require their contractors to have this coverage. When a worker has an accident at work, this policy will cover the costs of their medical care and a portion of lost wages. This helps protect your business and allows you to focus on the work rather than dealing with a lawsuit or paying out-of-pocket damages.
Your location, the kind of work you do, and your payroll are some of the factors that determine your insurance rates. The higher the risk for accidents, the more you will pay premiums. Your insurer will review your risk profile and adjust your policy during your contract term. You must pay fines and even imprisonment to avoid carrying the proper coverage. But with the help of a local independent agent, you can find policies to meet your state’s requirements and your unique needs. In addition to obtaining the right workers’ compensation insurance for your business, consider general liability insurance to help with legal defense costs in case of a claim.
It Pays for Lost Wages
The benefits provided by small business workers’ compensation insurance help cover some of the wages that would have been earned if a worker was not out of work due to a workplace injury or illness. This can be a vital lifeline for a family needing financial support while their loved one is recovering from an injury or illness. The insurer typically pays two-thirds of an injured worker’s average weekly wage (AWW). This amount is based on the employee’s gross earnings from all jobs, including overtime pay and bonuses.
It also includes non-work-related income, such as pension payments and Social Security benefits. A workers’ comp policy also typically covers funeral expenses for employees killed in a work-related accident and pays some of the death benefits to eligible survivors. Some policies may also cover other costs associated with a fatal work-related injury, such as legal fees.
Despite being required by law in nearly every state, the cost of a workers’ comp policy does not have to be prohibitive. Small businesses with low risks and a few full-time or part-time employees can usually find a very affordable option. To help keep costs down, many insurers use an experience rating system that adjusts premiums based on the number of claims paid in a given year and the severity of those claims. In addition, some insurers offer a pay-as-you-go workers’ comp option that lets you make payments based on your actual payroll rather than an estimate.
It Pays for Medical Care
Injuries and illnesses that happen while employees are on the job can be costly to treat. While health insurance can cover some costs, workers’ compensation covers most. That’s why many small businesses require their employees to carry this policy. Many states also levy costly penalties on business owners who don’t offer it. Medical treatment and services covered by workers’ comp include reasonable and necessary doctors’ fees, hospital treatments, services and supplies, and semi-private room accommodations if available. These benefits are paid in addition to any wages the injured worker loses.
In most cases, doctors must submit a request for precertification to the insurer and receive approval before treating a claimant. These requests are designed to control costs. It’s important to note that claims for injuries and illnesses occurring while an employee is off the clock or outside the workplace don’t qualify under workers’ comp. Employers can do their part to reduce the chance of work-related injuries and illnesses by posting safety signs, regularly cleaning up messes or tripping hazards, and replacing burnt-out light bulbs. They can also help reduce the cost of workers’ comp by implementing preventative measures, such as requiring employees to wear hard hats when working outdoors or using ergonomic office furniture and keyboards to avoid back strain.
It Pays for Damages
Depending on the state, workers’ compensation pays for medical expenses, a portion of lost wages, and other damages. It also covers death benefits to surviving family members. A small business owner may be liable for medical bills or funeral costs without this coverage. Many states require that businesses carry workers’ comp. Some have a minimum number of employees that must be covered. A business that operates in multiple states might have to pay for several different workers’ compensation policies because each state has its benefits and rules. In these cases, the policy might contain a “Declarations” section where the insurer agrees to cover claims made in the states named in that part of the policy.
Private insurance companies typically underwrite a workers’ compensation policy, though some states have state-run programs. The state Department of Labor or the workers’ comp board is responsible for processing and adjudicating worker’s compensation claims. If the insurance carrier denies a claim, the employee can request a hearing before an administrative officer in the department.
The state determines workers’ compensation rates, but actuaries at insurance companies and advisory organizations use data about loss experience to set rates. Insurance professionals can share this information with their clients as they explain how workers’ comp works, who qualifies for the coverage, and why the premiums vary.
