If you have employees, no matter how few, then you need workers compensation insurance. Generally, individual states require businesses with employees to carry it, but even without this legal incentive it is a necessary product.
Workers’ compensation helps to save your bottom line against the claims of employees who are left with medical bills and are unable to continue working after being injured on the job. It is a benefit that is solely provided by the employer and not something that employees can help to fund.
The first thought that springs into the minds of many small business owners is that, since their business is small and internet-based, what injury could possibly befall their employees? But repetitive stress injuries, trips and falls and sprains are not reserved just for large companies. They can strike employees at even the smallest home businesses.
Beyond providing compensation and medical fees for injured employees, workers’ compensation insurance has other optional protections that can be built-in to your policy and that may save your small business from financial losses. These protections include,
- Legal expense coverage if an employee makes a claim that is invalid or is part of a fraudulent activity.
- Funeral expense coverage for employees who are killed as a result of a workplace accident or injury.
- Financial support for dependents that lose a provider as the result of a work-related injury or accident.
The liabilities that a workers’ compensation policy can cover are flexible, so you can design a policy that makes sense for your business and your risk. Another great aspect of workers compensation insurance is that the owners of the business have the option of including themselves on the policy. They can opt not to and save money on premiums, or they can decide to cover themselves and get workers’ compensation benefits if they become injured at work while working (this is an important distinction for home-based businesses).
Some states allow certain companies to self-insure their workers’ compensation benefits, but because of the great financial risk involved this is not generally advisable and does carry some stiff financial, income and asset requirements for the business.
As if all these reasons weren’t enough to compel small business owners with one or more employee to carry workers compensation insurance, the states that require it have also instituted fines for those companies that are out of compliance. So if you choose not to get the coverage, not only will you suffer enough financial exposure to possibly result in the loss of your business, but you also may be fined on top of that.