In almost every state, it is required by law to get workers' compensation insurance. This insurance protects employers from lawsuits from injured employees. Unfortunately, it can be expensive and you may face a cancellation charge, depending on when you cancel. To avoid this hassle, make sure you understand all the benefits and drawbacks of having this insurance before you sign up for a policy. Listed below are a few reasons why you should get workers comp insurance.
- Worker's compensation insurance is required by law in almost every state
Most states require employers to carry workers' compensation insurance, though there are a few exceptions to the requirement. In most states, employers do not have to carry the policy if they are sole proprietors, LLCs, or casual employees. However, members of a limited liability company or close family of an employee are presumed to be covered. In addition, some states allow employers to self-insure and avoid paying the required premiums.
- It protects employers from lawsuits by injured workers
What is workers' compensation insurance? Workers' compensation insurance protects employers from lawsuits filed by injured employees and covers medical expenses and lost wages. It also protects employers from lawsuits filed by third parties. Workers may sue their employers or third party manufacturers of defective products. Depending on the circumstances, a workers' comp claim could involve a back injury, aggravated by a defective machine, or result in a lawsuit by the worker's spouse for loss of consortium.
- It can be expensive
You can find a better rate on workers' compensation insurance by comparing it with rates from other companies. This is because the rates are based on payroll, classification codes, and medical records of employees. You can also check with your state's board of insurance for specific rules. Workers' compensation rates may vary a great deal from one insurer to another, so shop around. Be aware that you shouldn't sacrifice quality for a lower price.
- It's a liability for uninsured contractors
A contractor who employs a one-man subcontractor is responsible for providing the subcontractor with Workers Comp coverage, even if the subcontractor does not have employees. He is responsible for providing the subcontractor with a certificate of insurance, and maintaining that coverage throughout the project. If the subcontractor is a partnership, the contractor is not liable for compensating the partners, as long as the company is a single-employer.
- It's a form of health insurance for independent contractors
Although independent contractors do not have to carry workers' compensation insurance, some states require self-employed individuals to do so. In these cases, you must file paperwork with your state board of insurance to waive the requirement. In other cases, you may want to carry this insurance to ensure a smooth transition if your business grows. Whether or not you need workers' compensation insurance will depend on your specific situation.
