Best Workers' Comp Insurance for Small Businesses in 2024

What is workers’ compensation insurance?

Workers’ compensation insurance, also known as workers’ comp or workman’s compensation insurance, is a type of business insurance that provides financial support to workers who get hurt on the job or get sick due to their job. Companies are required by law to get workers’ compensation insurance to protect their employees in every state except Texas.

Workers’ compensation insurance protects both employers and employees and typically covers medical expenses, lost wages, and sometimes even covers disability or death benefits for a worker’s dependents. It also helps protect employers from expensive lawsuits that might arise due to accidents on the job.

Workers’ compensation insurance is an important tool for providing employees with financial security should they become injured in the workplace. It can also ensure compensation for employees who face medical bills and lost wages after sustaining an injury on the job—no matter how minor.

How does workers’ comp work?

For the business:

If you’re wondering how to get workers’ comp insurance for a small business, all you need to do is contact an insurance provider about buying a policy. You can also buy worker’s comp online. Plan inclusions and requirements are regulated at a state level, so it’s worth researching your state laws to ensure you are adequately covered.

Your company’s premiums (insurance cost) will be audited each year and are based on your company’s industry, number of employees, employee duties, and other factors.

If an employee gets sick or is hurt on the job, your company must file a workers’ compensation claim with the insurance provider on behalf of the employee. Depending on how robust your insurance plan is, you may have to help pay for some of the employee’s benefits, or you may face no out-of-pocket expenses at all.

For the employee:

If you are hurt or fall ill as a result of your job, your company will need to file a workers’ comp claim for you.

Once a claim is filed, your employer’s workers’ comp insurance company steps in and provides essential resources, including benefit payments as appropriate.

Depending on your company’s workers comp plan, you and your dependents may be covered. In other cases, only the employee will be covered.

While most employers are required to carry this type of insurance, some states allow employers to opt-out. Minimum coverage requirements and types of coverage required are also regulated at the state level. Therefore, if you have any questions, you can take a look at your state’s requirements.

What is state-fund workers’ comp insurance?

Some states offer something called “state fund” workers’ comp insurance. This type of plan is offered through the state and provides your employees with money and medical benefits if they are hurt or become ill due to their job, just as with a traditional workers’ compensation insurance plan.

A state fund is just like private workers comp, with the key difference being that the state fund insurance is administered by a state agency versus an insurance company.

If you get State fund insurance typically provides less flexibility than private coverage. However, it allows companies that utilize it to pool their risk, which can sometimes make a state fund cheaper than going through other workers comp insurance companies.

Who & what does workers’ comp cover?

While most business owner policies (BOPs) include general liability and some type of business property coverage, workers’ liability insurance is not typically included unless it is specifically added by the company when applying for coverage.

Generally, employers are required to provide coverage for both salaried and hourly employees, providing peace of mind for any team member who gets hurt on the job.

However, each state has different laws and regulations about workers’ comp, including worker eligibility and coverage requirements.

For example, in some states, immediate family members and dependents are not a determining factor when considering workers’ compensation requirements, which can impact coverage and payouts later on. In other cases, contract employees may be excluded when determining a company’s requirements for workers comp.

Regarding what workers’ compensation covers, you can typically count on workers’ comp to cover medical and rehabilitation costs associated with an on-the-job injury, plus lost wages due to the employee’s inability to work during recovery. Some plans may also compensate employees for permanent disability or even pay death benefits for those whose injuries result in fatality.

Here is a breakdown of what workers’ compensation covers in greater detail:

Medical costs

Workers’ comp insurance is best known for helping to pay for medical costs if someone gets hurt on the job. Beyond ER visits, it can help employees get the medicine and follow-up doctor visits they need to heal. Most workers’ comp policies will also cover the cost of assistive devices or equipment needed after an injury, such as crutches or wheelchairs. However, workers’ comp does not cover all medical costs, and some treatments may only be partially covered. The limits of your coverage will depend on your policy.

Lost wages

In some cases, a worker may be unable to return to work for a while due to injury. If this is the case, workers’ compensation insurance can help pay for lost wages during this time. This can be a huge benefit to the company as well as the injured worker who may be unable to support themselves or their families until they recover and get back to work.

It’s important to note that the amount of money someone receives for lost wages depends on their state’s workers’ compensation regulations. Some states may have caps on the amount of money a person can receive while others may not.

Disability benefits

Workers’ comp insurance can provide employees with disability benefits if they are unable to work because of an injury. This money will help them support themselves and their families until they can go back to work. Generally, the amount of money someone receives for disability benefits depends on their salary before the injury. As with lost wages, some states may have a cap on the amount of money that can be received as disability benefits.

Ongoing care

If someone is badly injured at work and requires ongoing care or rehabilitation, workers’ comp insurance can pay for this. Ongoing care includes money for medicine, doctor visits, physical therapy, and medical equipment like crutches. It can also help pay for lost wages if the person cannot work while recovering.

Employer liability insurance

Apart from paying medical costs, lost wages, and disability benefits to support the injured employee, worker’s comp can include liability insurance for the company. Liability insurance helps protect employers from legal issues as a result of the injury and can cover the cost of potential lawsuits that may arise if an injured employee decides to sue their employer.

Death/funeral expenses

Workers’ comp insurance can help pay death benefits and cover funeral expenses if someone dies due to a work-related injury. This money will help the family of the injured person cover end-of-life costs and other related expenses. That said, not all states require employers to provide this coverage, so check the regulations in your particular state.

Now that you have an understanding of what is typically included in workers’ comp coverage, let’s take a look at what may not be covered.

What things aren’t covered by workers’ compensation insurance?

Workers’ compensation insurance doesn’t cover everything, and not all types of accidents or medical payments qualify for coverage under this type of policy.

Depending on the state and the policy, the following may not be covered by workers’ comp:

• Self-inflicted harm
• Injuries resulting from the use of drugs or alcohol
• Injuries or illnesses arising from illegal behavior
• War-related incidents
• Fires or explosions occurring off the job site
• Willful misconduct
• Injuries during a work-related commute
• Medical travel coverage while on business trips

Therefore, you may want to consider supplementing your workers’ comp plan with another type of insurance such as general liability, errors & omissions, business personal property, cyber liability, or inland marine insurance.

Is workers’ compensation insurance required by law?

Workers’ compensation insurance is a legal requirement in every state except Texas.

Additionally, some states, including Ohio, North Dakota, Washington, and Wyoming, mandate that employers buy workers’ compensation insurance directly from their state funds.

Companies need to ensure that they have workers’ comp insurance before hiring workers, or they can face hefty fines and other penalties. So if you are looking to hire employees, confirm your company is up to date with workers’ compensation laws and regulations.

Who needs workers’ compensation insurance?

Any type of business that has employees needs to have workers’ comp coverage as a protection for workers and for business finances. In some cases, sole proprietors can also benefit from having workers’ comp. Here is some examples of types of companies that could benefit.

Who doesn’t need workers’ comp insurance?

While almost all states require employers to provide workers’ comp insurance for their employees, not all businesses are required to provide such coverage. These include self-employed individuals, such as those working in small e-commerce businesses, those employed in domestic labor fields, and anyone employed as an exempt corporate officer. Furthermore, volunteers do not need to be covered by workers’ comp while working in a nonprofit organization.

While many types of employees and organizations qualify for a workers’ comp exemption, getting coverage may be a good idea. For example, self-employed individuals aren’t required to obtain workers’ compensation coverage for themselves. However, if they get hurt in the course of their work, they may not have coverage for certain medical benefits or lost pages while they recover.

What happens if I don’t have workers’ compensation insurance?

Not having workers’ compensation insurance can be a huge problem for employers. If an employee gets injured on the job and you don’t have a workers’ comp policy in place to cover them, in some states you could face fines, have your business operations halted, and face jail time.

For example, according to Section 3700.5 of the California Labor Code, not having workers’ comp in California is a criminal offense. If you are caught without workers’ compensation for your employees, you will be fined a minimum of $10,000 and could spend up to 60 days in county jail. Additional fines may be issued based on the number of employees you have up to a total of $100,000.

Apart from being fined by the state, not having workers’ comp in place can leave your company vulnerable to lawsuits from disgruntled employees if an incident isn’t properly resolved.

Ultimately, every company should carry adequate workers’ compensation insurance when hiring new staff members to have peace of mind knowing that all workplace accidents are covered if the unexpected ever happens. If you need help knowing what type of coverage you need, an insurance professional can help you understand your options and requirements.

How much is workers’ comp insurance?

Based on these factors, workers’ comp insurance will typically cost businesses anywhere between $0.30 to $1.00 for every $100 of employee payroll.

Get Workers Compensation insurance from $46.33 per month*

*Monthly payment calculations may vary by state, insurance provider, and the nature of your business.
Averages based on May - July 2023 data of 10% of total SimplyBusiness policies sold.

That said, the true cost of workers’ comp insurance depends on many factors, including:

• Your company and industry
• Claims history
• Number of employees
• Employee hours and wages
• Job classification codes

To give you a real-world scenario of how much workers’ comp costs, we ran a simulation through Simply Business’s online workers’ comp quote builder to determine the price for an electrician in Pennsylvania. With one employee and a payroll of $45k, an owner-excluded workers’ comp plan turned out to cost $857 per year. To increase coverage and include the owner, the cost grew to $1,491 per year.

To give you another example, this time for sole proprietors, we looked at a painting & wall covering company in Georgia. This type of workers’ compensation insurance quote didn’t require us to enter an expected annual revenue and came out costing $227 a year. These numbers are just examples and the cost of workers’ comp for your company will vary widely based on the factors mentioned above. However, it’s interesting to see how affordable Workers’ Comp protection can be even for a small business.

It’s important to remember that workers’ comp premiums are audited annually and may fluctuate from year to year—particularly if the size of your business’s payroll changes. Keeping an eye on regulations within your industry can help you anticipate possible changes or adjust payroll accordingly if needed.

Thankfully, there are some ways for employers to reduce the cost of their workers’ comp insurance, including holding worker training and taking other steps to limit hazards and promote safety in the workplace.

Tips for choosing the best workers’ comp insurance

Here is our list of tips for choosing the best workers’ comp insurance for your small business:

1. Know your state’s workers’ compensation insurance coverage requirements and state fund options
2. Understand the coverage and services provided by different workers’ comp insurers in your area
3. Get quotes for workers compensation insurance from multiple providers to ensure you get the best business insurance policy for your budget.
4. Consider each company’s workers’ comp insurance cost, reputation, claims process time, and customer service before choosing a provider
5. Research each company’s financial strength and stability rating to ensure they can deliver on promises regarding payouts or services if an employee is injured on the job
6. Check for any exclusions in each company’s policy documents that may prevent certain types of medical expenses or injuries from being covered by the workers’ compensation insurer
7. Ask about additional benefits such as rehabilitation programs or return-to-work initiatives that could provide extra protection for employees who have suffered workplace injuries
8. Ensure proper documentation is collected before setting up a workers’ comp insurance policy so there are no issues with filing claims down the line
9. Make sure all employees are correctly classified when applying for coverage
10. Inform employees of their obligations under new policies so that everyone remains compliant with state laws governing worker’s comp insurance
11. Work with experienced professionals who can help you identify areas where further coverage may be needed, particularly if your business operates in high-risk industries like manufacturing or construction
12. Review your workers’ compensation policy regularly to ensure it meets your needs as the business evolves and grows