Who Needs Workers' Compensation Insurance?
July 23, 2019
As a business owner, you likely wonder what legal adherence you need to make regarding worker’s compensation insurance. Is it really necessary for you to provide such coverage and benefits for your employees? What about if you are a small relatively safe-- in terms of physical risk on the job-- company? According to the Insurance Information Institute, even if you have taken every conceivable measure to keep your employees safe while at work, are a small company, employing only a handful of people and/or work in a low injury risk field, yes, legally, you must provide your employees with worker’s compensation insurance.
Why You Must Provide Worker’s Compensation to Employees
Although you might hate the thought of paying into the system, worker’s compensation insurance is a protection for you as well. It will protect you from employee-initiated lawsuits over injuries sustained while working and will also provide much-needed compensation and medical care to your injured employee. In most states, worker’s compensation insurance isn’t just a suggestion, but a legal requirement. To determine what type of coverage you must-have for your specific state, check out this state-by-state comparison outlined by the National Federation of Independent Business.
Each State Differs, Some With More Options Than Others
As mentioned earlier, each state will have its own regulations pertaining to worker’s compensation requirements. Five states, Wyoming, West Virginia, Washington, the U.S. Virgin Islands, Puerto Rico, Ohio and North Dakota take it a step further. Not only are businesses within these states required to provide worker’s compensation, but they also have to purchase it through state-operated funds. This scenario is often referred to as a monopoly state fund. Professional organizations like Consolidated Personnel Services can ensure you adhere to all the state requirements in which you do business.
What About Arizona?
Thankfully, Arizona is one of the thirteen states that allows you as a business owner to purchase a worker’s compensation insurance plan through a private insurance company. They also have a state-funded plan as well but do not require businesses to use only that resource. As far as Arizona goes, it is mandatory for all business owners, even sole proprietors who hire at least one employee on a regular basis to provide worker’s compensation insurance. Since January 1974, Arizona state law has required all private and public employers who employ at least one other person to carry the coverage. There are a few exceptions that remove this legal obligation, and they are listed below:
- You only hire casual workers, domestic servants, working partners or independent contractors working within your home.
- A sole proprietor who does not have employees, though you can opt for the coverage if this is you.
What Worker’s Compensation Insurance Covers?
You might assume worker’s compensation insurance is just “one more thing” you need to provide as a business owner. However, the risk/reward factor is too great to do without it. Not to mention the fact that it’s legally required as outlined above. The following are some benefits that can be gained through worker’s compensation coverage:
- Treatment-related to loss of limbs or illness.
- Any medical treatment required for an injury sustained at work on while working outside of the office.
- Treatment of any disease that comes about due to repetitive motion or to address conditions like emphysema.
- Rehabilitation needs that will help workers get back up and moving again.
- Death, some worker’s compensation insurance even covers the unfortunate event of death.
- It gives your business liability insurance coverage if lawsuits are filed blaming you for an employee’s injury.
- Compensation for lost wages for employees who miss work due to injuries sustained on the job. This can be up to two-thirds of their salary.
How Much Does Workers' Compensation Cost?
Now, let’s get down to the nuts and bolts. How much does this all cost? It sounds wonderful, but can you afford it and still operate your business? Well, it all depends on what type of business you own and operate. The rate you pay per employee for their individual worker’s compensation insurance will be based in large part on the occupational codes set by insurers. There are some 700 different occupational codes and each one is different in terms of premiums. Therefore, to give an exact cost-per-employee for worker’s compensation coverage would be difficult. However, you can get in the ballpark if you consider that premiums are calculated per each $100 of your payroll.
This means a low-cost occupation, such as your administrative assistant, would likely only cost about 30 cents for every $100 he or she makes. As you might expect, this number will go up based on how likely it is for your employee to become injured on the job. High-risk occupations can get expensive. For example, some truck drivers cost nearly $10 per every $100 they make. Usually, rates adjust every three years. This can be a good event or bad, depending on whether an employee has had to use their coverage. Just like any other insurance coverage, if you have to use it, the rates will often increase after the fact. Conversely, if you haven’t had any claims, or they have been small, you might qualify for a refund or for a reduction in your premium.
In conclusion, worker’s compensation insurance is obviously something you hope you will never have to use, just like most other forms of insurance. However, it is the coverage you most certainly should have and are even legally required to provide if you have at least one employee. Contact us at Consolidated Personnel Services to learn more about your specific coverage needs.
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