Does My Business Need Workers Comp?

Workers compensation insurance is a type of coverage which allows a worker, or employee, to get a certain amount of coverage from their employer, should they be injured or killed in the course of doing their job. Often referred to as "workers comp," this type of insurance provides benefits in three different different ways. The first is for a portion of lost wages, the second is for medical costs associated with the illness or injury, and the third is in providing death benefits to the family of the worker, should the employee be killed as a result of their job. The tradeoff is that, by accepting the limited amounts that they will receive through workers compensation, employees are waiving their right to sue for any further monetary compensation.

Although all states have workers compensation statutes in place, and all employers are responsible for paying workers compensation claims, not all businesses opt to carry workers compensation insurance. Workers compensation insurance can be quite expensive. It is possible for a business to lower its workers comp rates by demonstrating a track record of having few claims, but this process can take a number of years. For this reason, many start-up businesses opt not to carry this coverage.

For some businesses, not having workers compensation insurance is not an option. Even if it is not required by law, there may be too great a risk of accident, and resulting financial ruin, for a business not to carry it. Construction companies fall under this umbrella. Due to the physically intense nature of this type of work, the odds of a worker being injured at some point are high. Construction workers have a high risk of injury over their career. Employers in the construction industry need to keep themselves protected.

Another field that should always carry workers compensation is food service. Employees in a restaurant face some very specific dangers. For example, restaurant workers often work with knives, are around very hot cooking surfaces, and are exposed to wet, slippery floors. Similarly, businesses in the transportation field also need to carry workers comp insurance. If your employees are driving a vehicle as part of their job, then there is the risk of a workers compensation claim resulting from an auto accident. A business is well advised to account for these possible injuries beforehand with workers compensation insurance, rather than having to deal with the expense out-of-pocket, which could be quite significant.