Do You Need to Have Workers' Compensation Insurance?

If you’re already trying to figure out what sort of business insurance you need, the thought of adding one more policy might make you cringe. However, workers’ compensation insurance is actually one of the most important policies that your business can carry. Not only are you legally required to have it, but it can save your bottom line a ton of money in the long run.

How does workers’ compensation protect your business?

No workplace is perfectly secure, and no employee is 100% accident proof. Whether your business is moving furniture or working at an office - if you have employees then you need to have workers’ compensation insurance.

Workers’ compensation insurance protects your business against claims that employees can make for illness or injury. This can be a physical injury, like a broken bone or a torn rotator cuff, a repetitive strain from overdoing a certain movement during work, or an accident that happens in the workplace like a slip and fall on ice outside the office door. Health insurance does not always cover these sorts of injuries, and so workers’ compensation protects a business in case an employee makes a claim.

Do you need to carry workers’ compensation insurance?

The short answer is yes. Workers’ compensation insurance is mandatory for employers in 48 States. The only two states that do NOT require employers to carry this coverage are Texas, and South Dakota.

The laws about workers compensation vary state by state as to who is required to carry workers’ compensation coverage and who might be exempt. Some states have exemptions for farm workers, domestic helpers, or independent contractors, but others do not. Some states require coverage above a certain number of employees, and other states require insurance for just a single employee.

Our handy guide helps you check the laws and regulations in each state for what sorts of workers’ compensation coverage your business might need.

What if I don’t have any employees in my business?

Every state is different and has different requirements about workers’ compensation for self-employed entrepreneurs. Some states for example do not require coverage for less than 5 employees. Other states, though, need coverage even if you’re your only employee (although some don’t require coverage for independent contractors so it is important to check).

For states that require coverage for you as the employee/business owner, you can take out what is known as a ‘ghost policy,’ which meets the legal requirements of having coverage but also recognizes that you’re unlikely to make a claim. There may still be some cost with ghost policies, but it’s significantly less than coverage for multiple persons.

Even if you’re in a state that does not require coverage for your business, workers’ compensation can still be beneficial to protect your interests.

Do 1099 workers and independent contractors need coverage?

1099 workers are technically independent contractors, whether they’re freelancers or self-employed workers. Yet if they’re doing work for you, on your property, and they are injured, who is responsible?

Again the rules change state by state, and some states may require coverage for 1099 workers. Yet unless your state regulations specifically state that 1099 workers do NOT need this coverage, it’s always smart for employers to carry. If there is an illness or injury some states will require the employer to pay damages, and often it’s easier for employers to simply carry more coverage than to try to find independent contractors with their own coverage.

How do you get workers’ compensation coverage?

Foxquilt has made that part easy! Our technology has allowed busy employers to get a quote quickly online without having to meet with a salesperson or take time out of their day. Learn more about our workers’ compensation coverage here.