Do I Need a Workers’ Comp Policy?

When it comes to Workers’ Compensation insurance, business owners are often too focused on dollars and cents to see that the benefits far outweigh the premiums. Policies pay for three things when an employee is injured at work:

• Medical bills
• Recovery costs
• Partial missed wages

In addition, workers’ comp usually protects employers from lawsuits by workers injured while working. A component of workers’ comp, known as exclusive remedy, states that in exchange for an employee receiving benefits/compensation for their injury, the business owner is typically protected from legal liability. Workers will receive benefits regardless of who was at fault when the accident happened. If a worker is killed while working, workers’ comp provides death benefits for the worker’s dependents.

Employers in many states are required to provide workers’ compensation insurance for their employees. Specific employer coverage requirements are based on the type of industry, number of employees and entity organization. For example, Florida requires coverage for the following scenarios:

1. Construction industry – One or more employees, including business owner
2. Non-construction industry – Four or more employees, including business owner
3. Agricultural Industry – Six regular employees and/or 12 seasonal workers

Depending on the state, a business owner may not be required to carry a workers’ comp policy if he or she has fewer than the specified minimum number of employees. But just because the coverage is elective, doesn’t mean an employer shouldn’t have it. In Texas, businesses are not required to carry a policy to cover work-related injuries. However, employers are responsible for medical and other expenses if there is a workplace injury or illness.

Think about an example for a moment. You run a small shop serving ice cream with your wife and two part-time college students. Your wife slips and falls after washing dishes. She breaks her legs. Without workers’ comp, you’re paying out of pocket for whatever medical bills she incurs. If the injury is serious, the cost of those bills could bankrupt your business. Why wouldn't you, for pennies on the dollar, cover yourself and your business against claims?

Here are some common mistakes business owners and managers make:

• Not insuring the owner: Some business owners exempt the owner(s) from the policy, which is legal. But does it make sense? If the business had to run without the owner because of an injury, what would happen to it?
• Not covering every employee for every job they perform: In many companies, workers may have multiple roles, such as construction workers who may do both framing and roofing. Coverage should be specified for each of these class codes, along with the percentage of time typically spent on each.
• Not realizing they can save money on premiums: A combination of safety programs and wise selection of carriers can make a big difference in the cost, as carriers may charge significantly different premiums. Regular safety training, creation of a safe work environment and enforcement of safety rules are among the best ways to reduce the cost of premiums. In addition, it’s always a good idea to shop for the best coverage and cost.

One way to manage cost is to work with a PEO like FrankCrum. That allows the business to take advantage of larger group rates. Better yet, if the PEO owns its own workers’ compensation insurance carrier, there may be even greater pricing flexibility and more savings on premiums. Remember, whether it’s required in your state or not, carrying workers’ comp is important. It’s your main remedy for injuries or accidents on the job. You can’t afford not to look into it.