Understanding Workers’ Compensation Insurance: What It Is and Who Needs ItMarch 15, 2023 12:00 pm
Wondering if you need workers’ compensation insurance? It can be a great benefit for business owners looking to protect their workers and minimize their own liability. It is even required in some states. However, workers’ compensation insurance is not for every employer. Read on to find out what it is and who needs it.
What Is It?
Workers’ compensation insurance protects people who are hurt or become ill on the job. It is a way to put the employee and the employer on the same side. That is because workers’ compensation insurance stands in for tort liability. Under tort law, an employee may have to sue their employer to collect for workplace injuries or illnesses. Under workers’ compensation laws, an insurer provides coverage to the employer for the employees, which means that the employer and employee do not have to be adversarial.
The insurance covers more than medical expenses. It can also cover lost wages and rehabilitation causes. It only covers employees who are at the workplace and/or engaged in their job. However, the definition of employee can be elastic. If an employer can direct how a subcontractor performs their job, then that subcontractor may be an employee for the purposes of workers’ compensation. Workers’ compensation also includes death benefits for surviving family members.
Who Needs It?
The first thing you need to investigate is whether your state requires you to have workers’ compensation insurance. Some states mandate workers’ compensation coverage for certain types of businesses. If you are engaged in that type of business, then you need to carry the coverage. If you do not, you not only face civil liability for the injuries or illness, but also may have penalties for not having workers’ compensation coverage.
You can have workers’ compensation coverage even if it is not mandated. In fact, if you are in a business that is not considered as dangerous, your workers’ compensation coverage may be very affordable. That is because workers’ compensation insurance rates depend on the type of business and the size of the workplace. If you have a very safe workplace, you can use your experience rating to try to get lower rates than average. On the other hand, if your workplace is more dangerous than average, you may pay higher rates.
Not sure whether you need workers’ compensation coverage? Contact us. At Capstone, we can review your state’s workers’ compensation requirements. We can also go over the different options available to you, whether or not you are required to carry that coverage.