Protecting your company from financial loss is a big priority for every business owner, driving many to obtain insurance coverage for work-related injuries. Work injury coverage is necessary, but it is also required by law in most states if you employ people. Workers’ compensation insurance offers essential protection for both you and your employees. It assures that injured workers receive their lost income and the treatment they require regardless of responsibility. In addition, companies are shielded from costly employee lawsuits resulting from on-the-job accidents. That is why, if you have employees, most businesses need workers’ compensation coverage. So, the question that comes up from many business owners is when do I need to purchase workers comp insurance?
When Do I Need to Purchase Workers Compensation Insurance?
Whether your company is well-established or just getting started, knowing when to purchase workers’ compensation insurance is critical. Most states require workers’ compensation insurance to be purchased when hiring your first employee. Therefore, it is critical to obtain coverage ASAP. Even as the sole proprietor, you may be required to have insurance coverage for work-related injuries. In addition, depending on the state in which you operate, you may need to obtain a contractor license.
Without this crucial insurance coverage, you’ll have to pay expenses out of pocket because it is unlikely that your health insurance will cover medical expenditures linked with an employee’s work-related accident or sickness. In addition, noncompliance with state workers’ compensation regulations may result in civil or criminal fines.
Your Business Location Affects Your Insurance Coverage Requirements
Workers’ compensation rules vary from state to state. You’ll need to learn about the insurance coverage regulations for work comp in the state you’re located. Suppose your business is located in one state but employs workers in another. You’ll need to purchase insurance coverage depending on each state’s regulations.
Additionally, the number of employees you have will also determine when you need to get workers’ compensation insurance coverage. Work comp insurance coverage is required in several states for businesses with one employee. The requirement may indicate that you do not need insurance coverage unless you have two, three, or five employees in other states. Even if your employees are company executives or family members, they will undoubtedly require coverage under your workers’ compensation policy.
The requirements and exclusions for work comp insurance coverage may vary by state. Some states, for example, mandate coverage for anybody working in the construction or roofing sectors. In Missouri, employers with five or more employees must carry workers comp insurance coverage. Additionally, in the construction industry, if you have one or more employees, you must obtain insurance coverage.
Frequently Asked Questions
Do independent contractors require workers’ compensation insurance?
If you are self-employed or the sole owner of a business with no employees, you are generally not required to obtain your workers’ compensation. However, some employers require independent contractors to carry workers’ compensation insurance to lessen their exposure.
Although it may not be required by law or contract, it may be good to acquire workers’ compensation insurance coverage to pay your medical expenditures and missed earnings if you are hurt.
Is workers’ compensation coverage required for part-time employees?
If your state requires workers’ compensation for full-time employees, you can expect it to be required for part-time and seasonal employees.
Is it necessary to purchase workers’ compensation for subcontractors?
Depending on how your state defines who an employee is, you may be obliged to get workers’ compensation insurance for subcontractors. Your subcontractors may have their own workers’ compensation insurance policy; however, your state may require you to provide this coverage.
Is it necessary to purchase workers’ compensation coverage even if it is not required by law?
There are various reasons why purchasing workers’ compensation insurance coverage may be in your best interests, whether or not the law requires it. First, although you will need to budget for workers’ compensation insurance, the cost of the insurance premium is likely to be less than the cost of medical expenditures you would incur if you or your employee gets hurt on the job.
When you get work comp insurance coverage, you cover both your employees and your company. If an employee is hurt while working, they can file a claim and get cash support for medical treatment, continued treatments, and lost income. If an employee is killed on the job, workers’ compensation will pay death payments to their dependents and a share of their funeral expenses.
Your insurance coverage for work comp protects company owners by minimizing their liability in the event of a lawsuit. Most workers’ compensation policies include employer liability insurance, which covers you if an employee claims your carelessness caused their accident.
Once a workers’ compensation claim is settled, the employee is barred from bringing subsequent claims or lawsuits relating to the same accident or sickness. That means you’re safe from additional legal action, which might cost you time and money.
What happens if you do not purchase workers’ compensation insurance?
Failure to carry the requisite insurance coverage for workers’ compensation may result in administrative penalties such as fines or stop-work orders in most states. However, some states impose criminal penalties, and you might face misdemeanor or felony charges and jail time.
Suppose your employee is hurt while you do not have the proper workers’ compensation coverage in place. In that case, you will be liable for the expense of any medical treatments, lost earnings, and other benefits that your workers’ compensation policy would have covered.
According to the National Safety Council, the average cost of a workers’ compensation claim is $40,000.00. Paying for workers’ compensation coverage, on the other hand, is usually a lot better value for your company. As a result, small business owners may obtain it even though it is not needed by law.
What is the cost of workers’ compensation insurance?
The cost of workers’ compensation coverage will be determined by your insurer based on where you are located, your industry, the number of employees you have, and your claims history.
The higher the risk in your sector, the more the workers’ compensation rates your insurance carrier will charge. Workers’ compensation coverage costs an average of $1.11 per $100 in payroll costs. Because averages include extremes such as high-risk construction enterprises that pay substantially more in workers’ compensation premiums, median (midpoint) expenses offer a more accurate picture of what you could pay.
If you’re unclear about your sector’s risk or get a work comp quote, consult with Missouri Work Comp Specialists to find the best insurance coverage for your budget.
How is workers’ compensation insurance coverage calculated?
Your insurance cost is based on various factors, including:
- Payroll
- Location
- Employees’ number
- Factors of industry and risk
- Coverage limitations
- History of Claims
How do you get started with purchasing workers’ compensation insurance?
Getting the right coverage for your business is essential. To help you get the coverage you need, Missouri Work Comp Specialists are here to help. We work with business owners to ensure they get the right insurance coverage to protect their business and staff. To get started, contact us today.