If you work in any industry with unique safety hazards, you’ve probably heard of “workers’ compensation”. This type of insurance coverage is critical for protecting you or the company you work for in the event of an injury. However, did you know that workers’ compensation can be equally important when you are self-employed? Whether you are a small business owner, an independent contractor, or a sole proprietor, here’s why you need workers’ compensation coverage.
What is Workers’ Compensation?
Let's start by defining workers’ compensation. Workers’ compensation, also called “workman’s comp”, covers employees if they experience a work-related injury or sickness. This can include instances such as: automobile accidents on the way to or from the workplace, slip and falls, or illness that can be tied back to the workplace (like black lung in the case of coal miners). The biggest misunderstanding that we see is clients foregoing the purchase of Workers Compensation under the assumption that their health insurance policy will compensate them the same way a WC policy would. Worker’s compensation coverage is designed to assist employees with medical bills and replace lost wages from being away from work. Coverage can also include rehabilitation and funeral expenses. By taking advantage of workman’s comp, the injured employee forfeits the right to sue their employer as a result of the injury or illness.
Who Needs Workers’ Compensation?
Who is required to have worker’s compensation by law? Nearly all employers are required to offer coverage to employees in almost every state and it’s important for you to know your specific state’s regulations. While it may seem like common sense as to why Workers Compensation is necessary for large employers, it is also imperative for those who are self-employed to carry coverage. While you might not be required by law to have workers’ comp, self-employed workers might need it to obtain licenses, permits, or certifications in ‘high-risk industries’ like construction. Additionally, companies looking to hire a contractor could be more willing to work with you if you carry workers’ compensation because it signifies that you won’t sue the company in the event of an accident.
How Do You Benefit From Workers’ Comp If You Are Self-Employed?
Worker’s compensation is necessary for self-employed workers because health insurance policies typically will not cover injury or illness resulting from work activities, they are considered “better covered elsewhere” under a Worker’s Compensation policy. This means that you can be left responsible for injury-related fees if you don’t carry workmans’ comp for your own business. For example, let’s say you are an independent contractor. You are the only employee at your self-owned business. If you slip and fall while working, your health insurance alone will not cover your medical costs nor would it cover your lost wages while on the mend. You would need workmans’ compensation in this scenario to be adequately compensated.
Obtaining Proper Workers’ Compensation Coverage
Workers’ compensation Insurance can be confusing, but it is arguably one of the most vital and beneficial coverages you can purchase to protect your business. Carrying workers’ comp gives you and your employees peace of mind knowing that if any on-the-job injury, illness, or death should occur, everyone will be taken care of and your business will remain compliant with state and federal laws.
Penalties for not carrying required workers’ compensation can be detrimental to you and your business, depending on your state. Work with your insurance agent to make sure you have adequate workers’ compensation coverage in place. Research your state’s workers’ comp regulations and make sure you are classifying your employees correctly to avoid penalties, fees, or the risk of being uninsured.
Need help with workers’ compensation coverage? Contact an NBIG agent for a policy today.
We are dedicated to building policies that protect individuals and businesses alike.