Workers' compensation insurance came into the United States in the late 19th and early 20th century, known as Workers' Accident Insurance. It took until 1949 for every state to enact a workers' compensation program. These days, although specific requirements vary by state, most businesses with more than one employee are required by law to provide workers' compensation benefits. Companies typically have these benefits as part of their comprehensive workplace safety program, as it is a strategic investment for a business's most valuable players, their employees.
Why Should Your Business Have Workers' Compensation?
Assistance and Safety for Your Employees
The number one focus of a business should be its employees because, without them, the business suffers when they're injured and can't pay for the necessary care they need. Even the most prepared and safest of workplaces still encounter injuries or illness. The Bureau of Labor Statistics recorded over 2.6 million cases of nonfatal injuries and illnesses in 2021, with over a million resulting in days off work. Workers' compensation insurance works as a safety net when issues like this occur and can save you and your business a lot of time and money.
Protecting Your Business
Workers' compensation helps protect your employees from paying for their medical care and protects you and your business from having to pay it too. Moreover, there are also state penalties and fines that you may encounter if your business doesn't possess insurance. In California, these fines can reach upwards of $100,000. The cost of carrying this insurance in case of injury or illness outweighs the risk of being caught without it.
Exceptions to Workers' Compensation Coverage
Most sole proprietors are not required to carry workers' compensation insurance, unless you work with: concrete, heating and air conditioning, asbestos abatement, or tree service in California. However, you may need to buy a policy if you work in a high-risk industry, like construction or manufacturing.
Also, because workers' compensation insurance varies from state to state, though your business may be legally operating without coverage in one state, it may be illegally operating in another.
For example, if your business has employees based out of other states, your business needs to follow the specific workers' compensation laws for each state where your employees work. Workers' compensation coverage is not typically required for a company in Texas. However, if they have employees that work in New York, where coverage is required for all employees, they must have it, and the business owner can face legal repercussions if they don't.
Talk to Your Insurance Agent
The penalties and fines for not having workers' compensation coverage can negatively affect your business. Paying out of pocket for medical care can be a substantial financial loss in addition to the daily losses of having employees out due to injury or illness. To avoid lawsuits, fines, imprisonment, or, at worst, a business closure, every business owner should speak with a licensed insurance agent to guarantee that they comply with local laws and regulations for workers' compensation insurance.