Do Small Business Owners Need Workers’ Compensation Insurance Coverage?

Workers receive workers’ comp benefits on the basis of a medical records review. Here we look at whether small businesses need workers’ comp coverage.

Do Small Business Owners Need Workers’ Compensation Insurance Coverage?

Small business owners are often confused whether they need workers’ compensation insurance. There is no doubt; they do need this insurance program that helps protect both them and their employees from risks that are found in the workplace. It may even be required by their state. States regulate workers’ compensation and employers should ideally consult a workers’ compensation professional to ensure that they are abiding by their state laws. Employers have the duty to keep the workplace safe, but accidents can happen. When such untoward incidents occur, workers’ compensation comes into effect.

Employees are protected if they suffer from job-related injuries or illnesses and in both cases benefits are granted on the basis of a medical records review.

Small Business Owners and Workers’ Compensation Workers’ compensation program provides peace of mind to small business owners because if an employee suffers from a temporary or permanent disability, he/she will be taken care of both medically and financially. In addition, this insurance program also limits the employee’s right to sue the employer if an accident occurs. It limits employer obligations.

Employers can safeguard themselves against potential lawsuits when they have a workers’ compensation system in place because they can easily provide benefits if an employee is injured, falls sick or dies while on the job.

Here are some other facts about the program that small business owners need to know. ➢ You may not be required by your state to have workers’ compensation, but you still need it: In Texas, for instance, this program is not mandatory and many business owners choose to forego it. But it is important to remember that all businesses are held responsible to the state’s workers’ compensation laws for injured workers even though coverage is not required by law. So without the insurance in place, you may be putting your business at considerable risk such as high fines, and potential lawsuits if an injured employee proves that you were negligent. ➢ Not having workers’ compensation can increase costs: Employers without workers’ comp insurance will have to pay medical bills, lost wages, and even death benefits (in case the employee dies following a workplace injury/illness) “out-ofpocket.” ➢ With a good workers’ compensation program you can retain key employees: Workers’ compensation is an incentive for employees and will help to retain them in your organization. If yours is a business that involves workers handling heavy machinery/dangerous equipment, or one wherein workers are engaged in some

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hazardous occupation, a strong workers’ compensation program is indispensable for risk management as well as employees’ peace of mind. It will ensure your workers that they will be fully cared for in case of some unfortunate mishap or illness. ➢ OAI or Occupational Accident Insurance isn’t a suitable alternative to workers’ compensation: The coverage provided by OAI is sub-standard, compared to the robust workers’ compensation program. Under Texas law, it is even illegal for an insurer to offer OAI as a substitute for workers’ compensation insurance. o

When offering OAI as the form of insurance, employers have the burden of proving their case against the claim.

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OAI contains limits for coverage, and the employer is responsible for paying above those limits.

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In the workers’ compensation program, the employee has the burden of proving the injury if there is a lawsuit.

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A workers’ compensation policy will have $1 M to $11 M in coverage.

The Sole Proprietor Scenario The legal requirements for a sole proprietor business are much lower. Such a business owner won’t need many of the legal protections that are mandatory when there are employees in the organization. U.S. states typically don’t require workers’ compensation for sole proprietors. There is one problem though. Suppose you obtain a contract from another company, they may require you to have workers’ compensation insurance. Many companies have these requirements in place to protect themselves from unexpected liabilities in instances such as several contractors becoming injured and then claiming they were an employee of a certain contractor. This amounts to a contractor trying to claim workers’ compensation with the contracting company. When claims are made, insurance premiums may rise and this is something even large organizations will try and avoid.

Therefore, organizations that utilize contractor service from sole proprietor businesses will insist that the latter have workers’ compensation insurance.

Workers’ compensation is a complex system, and small businesses can consult with workers’ compensation lawyers to learn more about their liability and related issues.

Small businesses that find workers’ compensation coverage too expensive can always obtain affordable coverage via a professional employer organization (PEO). Such PEOs also provide training for the workers, ensure that the business is covered with top quality and cost-effective insurance, and help small business owners efficiently manage their risks.

They may also work with the injured employee and strive to get him/her back to work at the earliest.

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