As a business owner, you’ve probably heard of the various kinds of insurance covers your business should have. Of all the insurance covers a business should have, workers compensation insurance is among the most important ones. In fact, this kind of insurance could be mandatory for your business in a specific state. Many business owners, particularly beginners often wonder; what is workers compensation insurance? Why is this kind of insurance important? Well, to answer some of these questions, we shall look at the basics of workers comp insurance. Read through this piece for some insight.
What exactly is Workers Compensation?
For most employers, it is a mandatory requirement that they take full responsibility to ensure that their workplace is completely safe. Unfortunately, accidents are bound to happen from time to time. Workers compensation insurance ensures that any employees who suffer from illnesses and workplace-related injuries receive the medical attention they need in addition to wage replacement if they are unable to resume their workplace duties. Workers compensation will immediately kick in irrespective of who is at fault for the workplace accident, be it the employer, the employee, a co-worker or even a customer. And in exchange for the guaranteed benefits, employees will often have limited rights to sue their employer for any damages resulting from such injuries.
In most cases, workers compensation is state-regulated, therefore the statutes in every state will determine the kind of ailments and injuries covered, how such problems could be handled when they arise, how medical care is administered, and the benefits that an employee might receive.
Why Do You Need Workers Compensation Insurance?
Since the law requires that most businesses have workers’ compensation insurance in almost all states, you might be deluded into thinking that this is one of the many overhead expenses that will not provide any benefit to your business. However, the truth is that workers’ compensation is meant to protect your business as well as your employee.
It Protects Your Business
Besides covering you from any employee lawsuits due to illnesses or injuries sustained in your business premises, workers compensation insurance has many other optional aspects that could be of great benefit to a small business. Some of these aspects include:
- It provides coverage for any legal costs you might incur if one of your employees made an inappropriate claim regarding a work-related illness or injury. In most cases, this is usually automatically included in the standard workers’ compensation policy but you as the business owner has the option to decide the amount of coverage you want for this kind of liability.
- Coverage for employees who might get injured in another state, different from where your business operates.
- Workers’ compensation provides coverage for specific types of injuries and illnesses.
- It also offers coverage for any funeral expenses as well as dependent financial support.
- Coverage for a specific portion of reimbursement for any lost wages.
Additionally, it is important to note that the cost of premiums will vary depending on the optional coverage you go for, so you will need to take that into account when you receive your quotes.
Workers comp insurance for business employees covers almost all of their occupational injuries and diseases irrespective of who is at fault. Without this kind of compensation, you could be liable even if it was the employee who contributed to their own injury or illness. Workers comp insurance typically protects your employees in the work-related areas:
- Injuries that occurred in the work premises
- Injuries to a limb
- Loss of a limb
- Certain ailments
- Rehabilitation and medical treatment
- Lost wages, though it is only up to a specific percentage
As a business owner, you should always remember that you are legally responsible for the safety of your business premises and obliged to take all steps to make sure your workplace stays safe. But since accidents could occur irrespective of how safe your workplace is, workers comp insurance gives your employees the coverage they require to get proper care so that they can resume their duties in the shortest time possible.
Risks of Not Providing Workers Compensation Insurance to Employees
There are a few risks that your business could take by failing to provide workers comp insurance to its employees. Here are some of the risks.
Penalties for Noncompliance
To begin with, in a majority of states, the law mandates that all business have workers compensation insurance and failure to provide this coverage could be treated as a criminal offense. In most cases, this kind of criminal offense is treated as a misdemeanor offense. However, in the event that a court discovered that you intentionally omitted to provide this coverage to your employees, this offense could be a felony. Employers found guilty of such an offense could have to pay more than $2,500 in fine in addition to serving a one-year jail term.
Potential Employee Lawsuits
Any business could have to face a serious lawsuit as a result of one of their employees suffering a work-related injury. For instance, if an employee got injured in your business premises and ended up being permanently disabled, they could later turn around and sue you for all their suffering and pain, and you could end up compensating them for that as well. Such an employee could also go ahead to demand compensation for a lack of income since they can no longer work.
When you combine all the above with medical expenses for one of your employees, you will realize that this could cost your business a massive financial setback for failing to provide workers compensation insurance. And if the damages and medical expenses from the employee lawsuits are high, you might have to file for bankruptcy because you will probably have a financial burden that is too much for your business to handle.
Reduced Employee Morale
When employees are aware that they could count on your business to bail them out when work-related illnesses or injuries impact their livelihood, there will be more trust between you. When other employees see how well you as the employer supported and cared for an injured worker in the aftermath of a workplace injury, it builds their morale to work for you. Failure to provide workers comp insurance could reduce employee morale, which could negatively impact your business’s productivity since employees will not want to be so much engaged in their work.