In the United States, any business that has employees, regardless of the company’s size, must have workers compensation insurance, this being a legal requirement in every state. This type of insurance allows employers to handle their statutory obligations to their workers who may get injured while doing their job.
A bit of history
Workman`s comp is not a new concept; it dates back from the beginning of the 20th century. Precisely, in 1911 Wisconsin was the first state enacting a “no fault” system for workers who got injured on the job, to make sure they received prompt and fair financial compensation and medical treatment. Before this, it was difficult for someone who has been injured while working to get adequate compensation, because they had to take legal action against their employers, and the costs were not as predictable and affordable as they became after the workman`s comp system has been implemented.
Today, this type of insurance provides benefits including medical expenses, lost wages, vocational rehabilitation etc. Employers that fail to carry workers’ compensation insurance are exposed to paying penalties, besides the legal benefits to injured workers.
How can you get workman’s comp insurance?
It`s simple: you must purchase it from an insurance company, or through state-operated funds (only in a few states) called monopoly funds. If you expand your business to a different state, you will likely have to deal with different regulations, as workman`s comp insurance is locally regulated.
Do you need workman`s comp insurance?
Not every business is required to carry this type of insurance, so this question makes sense. Sole proprietors and partnerships who are not owners must not cover themselves for workers’ compensation, unless they choose otherwise. Also, some states do not require employees who are paid solely by commission to be covered either. The general rule is to get workman`s comp insurance if you have employees who are not owners of the company.
Workman`s comp insurance costs
This type of policy is a unique insurance contract. It does not have a maximum dollar amount limit, such as liability insurance policies, so there is no worry that you will pay additional money from your pocket if you exceed the limit, at least not in the case of the employer’s statutory workers’ compensation liability. Once you purchase the policy, the insurance company becomes responsible for the claims that arise.
If you worry about the costs for getting workman`s comp insurance, they are manageable if you act smartly. For example, if you purchase an assigned risk policy, you may end up paying much higher rates than if you would for the same policy written outside the assigned risk plan. There are other sources of workman`s comp insurance, such as associations that sponsor insurance programs including workers’ compensation insurance.
Keep in mind that costs are regulated by state and also depend on a few other factors than state laws: payroll size and number of your employees, type of work and risk involved as well as your claim history (fewer claims – lower premium).