Workers Compensation Insurance For Small Business

Why and when you need it. What to consider when choosing a package.
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Written by Brian Greenberg
CEO / Founder & Licensed Insurance Agent

Last updated: November 22nd, 2022

Reviewed by Grant Desselle
Licensed Insurance Agent

As employers, we have a responsibility to keep our employees safe when at work. This isn’t just for maintaining productivity; it’s also mandated by law, and will go a long way in creating a positive and supportive atmosphere. Which is a win-win situation for all parties involved.

Nevertheless, accidents can still happen at any moment. And so, instead of going through a very messy lawsuit, it’s important to have certain provisions in place. Workers Compensation Insurance is an example of this.

Some businessmen may think paying the premium on this might be unnecessary – and for most companies, it might be. But for those who have workers in high-risk environments, it is totally worth it. Just think of it as an airbag. You hope you’ll never have to use it, though you’re glad that it’s around.

What Is Workers Compensation Insurance For Small Businesses?

Definition: Workers Compensation Insurance pays an employee monetary benefits in the unlikely event of injury or disability at work. Employers offer this to workers prior to getting hired, as a way to protect both the business and employee from monetary loss.

Needless to say, it’s designed to safeguard the company, too. Accepting a job with this arrangement in place likewise means the worker waives his or her right to sue their employer in case they get hurt. This is an indirect agreement that they accept all possible risks that come with the job.

In general, also, Workers Compensation Insurance includes, but is not limited to:

  • Potential medical expenses, including hospital bills and doctor’s consultation fees
  • Cost of lost wages during recovery
  • Ongoing care expenses
  • Payment for rehabilitation
  • Funeral payment

What Small Businesses Need Workers Compensation Insurance?

As mentioned earlier, companies that utilize high-risk occupations are the primary beneficiaries of Workers Compensation Insurance. And while it’s not a business requirement in all states yet, it is still good to have.

To provide greater clarity, here are some examples of businesses that this is for.

  • Manufacturing – Statistically, working in a factory with heavy machinery has led to the most non-fatal workplace injuries. According to the US Department of Labor, this sector accounted for nearly 421,000 cases in 2019 alone.
  • Construction – Despite wearing a hard hat and safety vesting, working on a construction site is still extremely dangerous. There’s always that risk of getting hurt when using power tools, slipping off a scaffolding, or having something heavy fall on you.
  • Delivery Personnel – Whenever out on the street, automobile and motorcycle couriers always put themselves in harm’s way. Vehicular accidents are very possible and have become a very real part of their job.
  • Movers, Stockers, and Repair Workers – Injuries almost always go hand-in-hand when dealing with heavy equipment. Not to mention electrical and mechanical repairs.

Who Is Workers Compensation Insurance Not For?

On the other hand, not all jobs have a need for this type of insurance. Offering this to office clerks, secretaries, or even salespeople isn’t exactly bad, but it isn’t necessary either. Executives, likewise, won’t have any use for it. They’ll appreciate having medical or dental benefits instead.

Of course, any application for Workers Compensation Insurance needs to still be assessed by the provider. Your business industry and the type of work each employee does are just a few things taken into account. So it isn’t a sure thing yet. Here are some considerations that might result in disapproval, or at least get you to pay a higher monthly amortization fee.

  • History of Getting Hurt – One thing that insurance companies will look at and review is your personal medical history. Applicants who already have a record of getting hurt are usually denied.
  • Criminal History – In a similar way, individuals with an existing criminal history, particularly those convicted of fraud, may encounter challenges. Even if it’s coursed through a reputable company.
  • Jobs That Are Too High-Risk – Security guards, armored car drivers, window cleaners, and heavy-duty equipment specialists are just some jobs that might be considered too dangerous. In these cases, a higher monthly payment is needed to acquire Workers Compensation Insurance.

What Much Does Workers Compensation Insurance Cost?

Computing for this is done on a case-to-case basis. There are several factors that affect how much a plan costs. Because in the end, insurance agencies want – and need – to make money, too. So for your information, here are some things to look out for.

  • Type of Job – More high-risk jobs would likely result in a higher price being paid per month. Of course, it should still serve its purpose when any accidents may occur.
  • Number of Employees Enrolled – Even though there is a standard computation for Workers Compensation Insurance, most providers offer discounts when multiple accounts are enrolled. This setup also becomes convenient when claiming benefits because you’re just talking to one entity.
  • Location – What makes Workers Compensation Insurance so complicated is each state has different regulations for it. It’s even made more complicated if the main company is in one location, while the employee’s place of work is in another. For cases such as this, consulting a lawyer would be best.
  • Inclusions – The cost is also determined by what’s included in each package. Luckily, employers are allowed to dictate the inclusions and choose only what’s favorable for them. You can even customize it depending on your budget per person.

How Does Workers Compensation Insurance Work?

The relationship between an insurance agency and its customer is considered a partnership. Both parties mutually benefit from this partnership, achieving financial security and peace of mind in the process.

You probably already heard stories about employers going bankrupt after getting sued for negligence or paying thousands of dollars worth of medical bills. And this is exactly the outcome that Workers Compensation Insurance hopes to prevent.

Of course, insurance companies need to earn a profit as well. They do this through the monthly payments their clients make, which do not result in a claim. A commission is paid to each agent involved, while the rest is kept by the entity, for pooling together.

Each time a policy-holder is involved in an accident at work, they are entitled to monetary benefits, depending on the stipulations of their plan. Now, remember, it’s only in certain situations that a claim can be made.

Ultimately, as with any contract entered into by two sides, communication is key. So when you have plans of registering for Workers Compensation Insurance, make sure to clarify every single detail, ask anything that might still seem vague, and expound on your needs. Remember, you can never be too prudent with these types of benefits.

What You Should Know About Workers Compensation Insurance for Your Business

Purchasing Workers Compensation Insurance can be daunting, even mind-numbing at times. So here are a few important notes to remember.

  1. Negligence is Not a Reason for Claiming  Before releasing any sort of monetary compensation, insurance providers always conduct a very thorough investigation. And something they constantly keep an eye out for is negligence. In most cases, whenever a mishap happens because of a worker’s carelessness, they aren’t eligible to collect anything.Generally speaking, claims mostly happen because of fortuitous events or external circumstances. So at least on your end, be sure to have your bases covered so the process will run smoothly.
  2. Different Packages Include Different Perks  What makes Workers Compensation Insurance so versatile is its ability to be customized. As mentioned earlier, there are packages that consist of only the basic benefits that companies look for. There are the following:

    Medical Coverage – It covers hospital bills, medicine, doctors consultations, and other forms of additional treatment. This may also include any other rehabilitation cost that might be needed.

    Lost Wages – Whenever an employee isn’t fit to work, technically speaking, he or she isn’t technically eligible to receive a salary. But thanks to this, they can collect a portion of their pay (or even in full, depending on the policy) while recovering.

    As an add-on, companies may choose to include the following provisions. There are extraneous conditions that might be better suited for specific industries only. Of course, this will come with corresponding charges.

    Repetitive Injuries – Jobs like stockmen or porters, who regularly carry heavy items, can take a toll on a person’s body. This leads to chronic back and shoulder injuries, as well as other parts of the body. Having Workers Compensation Insurance will allow them to seek help immediately, instead of having it linger for longer periods.

    Grave Illnesses – Contracting a serious ailment like COVID-19,. and this risk drastically increases when in a confined space or traveling from one place to another.

    High-Risk Jobs – Occupations that require members to be placed in threatening situations aren’t covered. But they can always be added on. With the higher likelihood of getting hurt, this type of insurance is extremely useful. Just be prepared for the added expenditures.

  3. Can Be Claimed Even When Not Physically in the Place of Work  The first time you read this statement, it might seem like a mistake. But a closer look will reveal its true logic.Some jobs will require their employees to go out on the field for official business, which is perfectly normal. And in case accidents happen there, employees will still be entitled to monetary compensation. Employers will just need to produce documents like a timesheet, work order, or itinerary form to prove that an individual was clocked in at the time of the incident.

    This might take a longer time to process, but it’s not usually an issue. However, it is still best to consult with a lawyer to clarify this.

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How to Choose the Best Option?

Choosing the best Workers Compensation Insurance is never easy. With so many choices available, this task can be overwhelming. What might help, though, is following these quick tips, and zeroing in only on what’s important.

  • Assess Your Company’s Needs – Before even meeting with insurance agencies, evaluate your current situation first. This includes what benefits are included, how much the total coverage is, and the total number of employees. You can even identify a working budget, so narrowing down options is faster.
  • The Three Options Rule – Even when you’re already heavily leaning towards a particular provider, still have two other alternatives to fall back on. Remember, as the buyer, you have the leverage to demand the best possible deal. Compare every single detail between proposals for a truly well-informed decision.
  • Location is Everything – How Workers Compensation Insurance is administered varies from one state to another. Consider this, too, especially for corporations with multiple locations. Situations like this can get very complicated, very quickly, so it’s always a good idea to consult a lawyer specializing in labor regulations. It will cost more initially, but at least you avoid a greater headache down the road.

After getting those in order, you can also choose based on the following conditions.

  • Lowest Price – Applicable for companies with multiple employees who need only basic coverage. This includes coverage for medical bills, lost wages, and funeral expenses, so you can get the lowest possible price.
  • Most Popular – Offering a well-known plan is a great way to boost morale, keep workers motivated, and is an added strategy to retain key people in the company. Aim for companies with a solid track record of customer service, a quick claims process, and easy-to-understand guidelines. This way, even your Human Resources department is happy.
  • Most Comprehensive – Better suited for industries needing a wider coverage, or at least reserved for key people in the company. This can also benefit those who are in higher-risk situations or more likely to experience serious injuries. An example of popular add-ons are for long-term sickness, recurring illness, or high-risk situations.

How to Get the Best Deal on Workers Compensation Insurance?

Insurance companies usually conduct a site inspection prior to submitting a proposal. They do this primarily to assess risks, observe day-to-day practices, and identify potential problem areas in a company’s operations.

However, more and more providers are offering online options, too. All you need to do is submit your company information, the industry you’re operating under, and you’ll get a quote within minutes.

In terms of savings, businesses pay less for Workers Compensation Insurance by putting the following measures in place:

  • Assign a Safety Officer – This person looks out for and gets ahead of possibly hazardous situations. They are usually certified by your local government.
  • Conduct Regular Training – Constantly reminding employees of the proper work methods should reduce accidents greatly. And of course, show accreditors that the risk of negligence is very low.
  • Safety Provisions in Place – Having a fully-stocked clinic or health professional on standby is proof that a company is committed to the well-being of its employees. Which would only bode well for an establishment being evaluated.

Where to Look?

Finding the best possible providers can be done through an online or offline search. Read through reviews to see what other people think about a particular provider. If you are already working with an existing insurance company, ask them for referrals, too. Being in a similar industry, their recommendation might help get you a better deal.

Once you have a list of potential suppliers, search each one online and read through reviews. This is a good way of weeding out reliable options from bad ones.

Then, simply set up a meeting to know more about them.

What to Look For?

Naturally, it’s important to conduct your own background check. Remember, insurance agents will always put their best foot forward. So it’s important to do your own background check, too. Here are some resources you can look into:

  • Company Profile with Past Projects
  • Reviews Online like this or this
  • Call References to Verify Input
  • History of Claims
  • Complete Description

What You Should Not Do?

Before arriving at a final decision, you will be undergoing a lot of negotiations and back-and-forths. To ensure smooth conversations, here are some things to remember.

  • Don’t Commit If You’re Not Sure – The last thing you want is to verbally agree to a supplier even before checking out other options. Like what was mentioned earlier, you have the bargaining power. Take your time with weighing the pros and cons, and only when sure should you sign on the dotted line.
  • Don’t Falsify Information – Some companies, in desperation to get the best deals, would resort to submitting false data. This is a big no-no. Doing so is not only unethical, but could also affect your reputation down the road.
  • Don’t Make a Choice Based Only on Price – While getting the best deal is indeed important, it must never come at the expense of your employees. Make sure to always have their needs covered, too.

What You Should Do?

Here’s a simple step-by-step guide of what you need to do before arriving at a final decision.

  1. Identify Your Primary Needs – Know them by heart because it will provide you with the direction for all future discussions.
  2. Gather Referrals or Leads Online – Next is to accumulate your options. You can do this either by recommendation from trusted individuals or through a quick, yet thorough, Internet search.
  1. Evaluate All Possibilities – Getting to know each supplier on a deeper level is important. Set meetings to manage expectations and have them submit pertinent business documents. Of course, do your own background check as well. This will allow you to make an informed decision.
  1. Negotiate – After narrowing down your choices, don’t make a decision yet. Call each of your final options to haggle for the best price. Provide what promos other agencies are offering, if needed. This is a good tactic to lower the price even further.
  1. Build Rapport – Finally, when you’ve selected a provider for Workers Compensation Insurance, make sure to develop a strong relationship. It will come in handy when there are claims to be made. Business is always a give-and-take approach that’s built on connections we have with other people.

Frequently Asked Questions

  1. Are Workers Compensation Insurance the same in all states?  No, regulations vary from place to place. If you’re not sure, it’s best to consult with a lawyer specializing in labor laws.
  2. Can I remove policies that don’t fit my company’s needs?  By all means, yes! As the customer, you have the right to dictate the conditions. In most cases, insurance providers can even customize a policy to perfectly match your needs. Feel free to add stipulations, also, as needed.
  1. Besides injuries caused by accidents, what else can be included in Workers Compensation Insurance?  Chronic, recurring, or grave illnesses are often covered by these plans, too. Just make sure to specify it when meeting with any potential supplier.

Key Takeaways

Finalizing the Workers Compensation Insurance plan for your employees is never easy. But it’s something most businesses need to have. But your needs always need to come first. So, make sure to spell that out to insurance agents.

And when you’re choosing among several options, never sacrifice quality for a lower price. Workers Compensation Insurance for your small business is important to safeguard your employees’ welfare, too.

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