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What Small Business Owners Should Know About Workers’ Compensation Insurance


As a small business owner, you’re constantly working on your company. A successful business requires careful planning and preparation in case of an accident. If you’re unable to cover the cost of medical bills and damages on your own, it could run you out of business.

That’s what workers’ compensation insurance is for. This life-saving policy can prevent you from owing thousands in an accident case where you’re required to cover the costs. And if your employee decides to sue, you’ll be even more grateful that you had a policy in place. Here are some key points you should understand.

It covers accidents on the job

This is the most important part of your insurance policy. Every single injury on your premises is your responsibility, and your insurance policy will cover damages and medical bills associated with it. “Workers’ compensation insurance covers injuries and occupational diseases picked up at work,” says Joan Lisante at Entrepreneur. “Fault doesn’t matter; employers are liable even if the employee may have contributed to the injury or illness.”

This type of insurance covers several areas, including injuries inflicted at work, injuries caused by repetitive motion, diseases like emphysema, medical treatment, lost wages (usually up to two thirds of the employee’s salary), death, liability insurance for lawsuits, and rehabilitation.

Most states only require that you have workers’ compensation insurance if you have more than five employees. However, many business owners feel more comfortable with a policy in place even if they only have one or two employees. When deciding if you need a workers’ comp policy for your organization, consider the nature of your business. Some workplaces are more likely to experience injuries than others, such as those that use heavy machinery.

For example, if you run a warehousing company, someone will have to operate a forklift. You may have done everything right, including sending your employee to get his or her forklift ticket in Brisbane or another nearby city. However, accidents do happen, and they can be quite serious. You’ll be grateful for the financial coverage at that time.

It covers injuries in commercial driving accidents

If you run a business that involves driving a vehicle, such as a delivery-based business, your workers’ compensation insurance helps you cover medical bills for those involved in an accident. It also covers lost wages, rehabilitation, and other needs while your employee recovers.

Depending on your policy, it may also cover the cost of hiring car accident lawyers if your employee was in a two-way accident and the other party sues. Attorneys are necessary in this situation, but their fees can be high. It’s not something that many small business owners can handle and still come out on top without insurance.

It’s important to note that your workers’ compensation policy is not a substitute for vehicle insurance. You’re still required to have commercial automotive insurance for every vehicle in your fleet, since workers’ compensation only covers the person driving and not your vehicle, the other person’s vehicle, or the other person’s medical expenses.

It’s required in 49 states

Every state in the US except Texas requires your company to have workers’ compensation insurance. That being said, every state has different rules regarding the requirements for your policy. Some say it’s required if you have more than three employees and others say you don’t need it with less than five. The mandated base coverage amount may also vary by state.

Evaluate your state laws regarding workers’ compensation to ensure your compliance. This is a very important part of running a business, and you want to do it right before an accident occurs.

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