Maybe you’ve heard of workers’ compensation insurance, sometimes called workers’ comp. Perhaps you know what this term means. However, others know little about it or how it works.
Workers’ compensation insurance can help you in many scenarios, but as someone who owns or runs a company, you don’t always need it. If you’re going to launch a startup, you should know whether you must legally have this insurance.
We’ll talk about that in detail right now. We’ll cover what the term “workers’ compensation” means, who needs it, and what companies have an exemption.
What Exactly Does “Workers’ Compensation” Entail?
Workers’ compensation means a kind of insurance. It financially assists employees of a company if they hurt themselves while on the job. It also helps individuals who get sick while on the job.
This social insurance program has been around longer than any other kind in the United States. If you need it, you can use it for medical care. However, you can also use it for permanent or temporary disability benefits.
You can use it for supplemental job displacement benefits. Your dependents can use it if you die while on the job. In that case, they’re getting what the insurance industry calls death benefits.
As someone working for a company, you don’t need to pay into a workers’ comp policy to have eligibility. Your employer does that for you.
When Can Someone Use It?
For the most part, you can only get workers’ comp benefits if you injure yourself, get sick, or die while on the job. For instance, if you sprain your back while working for a company, you can probably get money through workers’ comp until you’re well again and can return to work.
Overuse or repetitive stress injuries can make you eligible. If you suffer a serious cut, puncture, or fracture a bone, you should have eligibility.
However, if you injure yourself or get sick while on your own time, then you probably can’t collect workers’ comp. In other words, say you sprained your ankle while playing a game of pickup football in the park with your friends while on your off day. Since that injury didn’t happen at work, you likely can’t collect workers’ comp.
You can always apply to workers’ comp to try and collect benefits if you hurt yourself or get sick. If you can’t prove definitely that the job made you ill or injured you, though, then you probably can’t get financial benefits.
Remember that when you apply for workers’ comp benefits, you’re not dealing with your employer, but an insurance company. Much like any other insurance company, that’s a for-profit entity. If they can turn you down and not pay you anything, they will likely try to do that.
How Much Does Workers’ Comp Cost for Employers?
A workers’ comp policy’s cost varies depending on many factors. If someone’s running a small business, they might get a modest policy for as little as $50 per month. The larger the company and the more employees it has, the more money they must probably pay to get an adequate policy.
Other factors often come into play as well. If a company operates within a potentially dangerous industry, like construction, then you can feel certain the employer must pay more to get it.
Think about all of the injuries that can happen on a construction site every day. It makes sense that an insurance policy that covers those workers would cost more than one for another industry.
You should also understand that each state sets its own amount of workers’ comp that an employer must carry. One state might demand that a policy carry a certain amount for each employee, while another may set a higher minimum amount. It’s just like car insurance; every state has its own rules.
Which Businesses Must Legally Carry a Workers’ Comp Policy?
Nearly all business entities must carry workers’ comp. This typically includes all for-profit companies with employees.
It also includes any LLCs with employees. It includes corporations, and even some non-profits as well. Basically, as long as a company has employees on the payroll, it needs to have a workers’ comp policy that matches the state’s requirements in which the business operates.
Most employers don’t have expertise with workers’ comp when they start a company, but they must learn about it if they want to have compliance with the state in which they’re located. They might contact a business lawyer who knows this industry.
The attorney can help the employer to find a policy and insurance carrier that works for them. If the employer doesn’t have the right policy, then the state can fine them or shut down the company entirely till the owner rectifies the situation.
Which Businesses Have a Workers’ Comp Exemption?
However, not every business needs to carry a workers’ comp policy. Some companies have an exemption.
For instance, let’s say you’re a self-employed individual who works from home. Maybe you have an eCommerce business. You might create handmade bracelets in your garage and ship them around the country. Perhaps you’re a computer programmer who works from home.
In such scenarios, you probably don’t legally need a workers’ comp policy. If you only employ yourself, then you can avoid this expense.
If you’re the sole proprietor of a business, then you needn’t carry a policy. If you start expanding and hiring employees, though, then that will probably change.
If someone works for a company on a part-time basis, they will normally have workers’ comp eligibility. However, any time an employer has questions about this, then they need to answer them. If they’re negligent in this area, then they risk state government intervention and some stiff penalties.
On the whole, most people seem to think that workers’ compensation serves an important purpose. If you injure yourself or get sick, and you can tie that to your job, workers’ comp can see you through some tough times.
