Workers’ Compensation coverage provides essential protection from these costly medical costs, which could potentially devastate your business without it.
Most states mandate employers purchase workers’ comp insurance for all of their employees, but what about smaller businesses with only 1099 contractors as employees?
Typically, 1099 workers do not need workers’ comp insurance; however, some clients may insist upon it.
1. It’s your responsibility
Workers’ comp, also known as workman’s compensation, provides employees with medically necessary benefits resulting from injuries or illnesses suffered at work, such as emergency room care, x-rays, surgery, prescription medication and disability payments. Workers’ comp also helps limit employers’ liabilities in case a worker sues over work-related injury or illness claims; some states make workers’ comp compulsory while in others it’s voluntary – however one serious claim against any small business owner could prove fatal, so it’s crucial that you have adequate coverage by having adequate workers’ comp insurance policy in place!
Many business owners believe they can save money by opting out of purchasing workers’ comp, but this may not be true. While state laws and line of work dictate who must purchase workers’ comp, certain states exempt business owners if they hire more than a certain number of non-employee contractors such as 1099 contractors and family members working for their business (for instance a parent working in a restaurant).
Workers’ comp policies are necessary in these instances to cover any injuries or illnesses sustained from these interactions, from stitching costs at an emergency room to permanent impairment that prevents work for several months at a time and results in lost income for employees.
Another issue arises if your business does not have a workers’ comp policy in place, as the state can investigate your company and issue fines or other penalties based on whether proper workers’ comp coverage was in place for your employees. Without adequate workers’ comp coverage in place, employees could be denied medical care access while you could face fines or other penalties from insurers. Luckily for New York businesses there are various strategies for saving premiums, including making sure employees are classified correctly and investing in pay-as-you-go workers’ comp plans that allow businesses to start off low upfront premium payments while paying monthly based on actual payroll figures rather than estimated payroll figures.
2. It’s a good idea
Though you might be tempted to forgo workers’ comp insurance because your business does not employ any employees, it would still be wise. Being held liable for workplace injuries that occur either on your property or while working for clients can leave you financially responsible – something personal health insurance won’t cover. Workers’ comp can help cover hospital bills and partial lost wages in such an instance.
Based on state laws, you may also be required to carry workers’ compensation insurance if you hire contractors or independent professionals for work on your behalf. Workers’ comp is often the only legal remedy available to injured employees who file suit against your business for negligence; failing to have sufficient coverage would likely prove extremely costly in terms of litigation costs and litigation expenses.
As a solo business owner, workers’ comp may still be an affordable solution for you as it will enable you to take time off when recovering from workplace injuries or illnesses without impacting financial stability. Furthermore, should an accident result in death on the job for which workers’ comp can provide a lump sum payout that covers funeral costs as well as income loss for your family members.
New York state offers exemptions to workers’ comp if your business consists solely of unpaid volunteers or family members on payroll and no full-time employees. However, these exemptions tend to only apply for sole proprietorships or single member limited liability companies not conducting high risk work.
Even if your business does not legally require workers’ comp, it can still be beneficial to purchase it as a precautionary measure. Workers’ comp can help defend against lawsuits filed by employees alleging injuries and illnesses at your workplace and will make your business appear more responsible and reliable, increasing chances of attracting quality talent in future hires and helping retain existing staff who feel less threatened by any potential risks that might be present.
3. It’s a legal requirement
Some states legally obligate small business owners to carry workers’ compensation coverage even without employees, while in others this requirement varies based on employee numbers or lines of work. Whatever your state’s requirements may be, injuries at work pose real threats that put financial risk onto companies like yours; it’s therefore imperative that they are met in your locality.
Definitions of employee vary, but generally speaking it refers to anyone performing services for payment under your direction or supervision, including independent contractors, casual maintenance or repair workers who do not work full-time, real estate agents/brokers paid on commission, drivers with contract carriers and more.
Opting out of Workers’ Comp coverage is a risk for any small business. If required to carry it but choose not to, you could face heavy fines or legal action; moreover, having this policy also protects against lawsuits filed by employees alleging workplace injuries and illnesses on the jobsite.
Some states, like Arizona, mandate employers provide workers’ comp coverage to all employees – including part-time and seasonal ones – including part-timers or seasonal workers. Other states such as Connecticut permit sole proprietors and single member limited liability companies to purchase workers’ comp coverage if desired.
Even though purchasing an insurance policy may not be legally mandated, there may be many compelling arguments for purchasing one. Some clients may require proof of insurance before hiring you, especially in fields with high injury rates such as roofing and construction. Showing you are an ethical contractor committed to the safety of its workers shows your responsibility as a responsible employer and that their health and wellbeing is priority one for your company.
In some states, such as New York, employers must provide all employees, including independent contractors with insurance policies. You may purchase this from either a private insurer or through the state-administered fund; self-insuring is another option; although rare.
4. It’s cheaper
As a business owner, it may seem more cost-effective to go without workers’ comp insurance altogether and pay any related expenses out-of-pocket instead. While this may be feasible in terms of costs, its risks far outweigh its savings potential. First of all, auditing by state bodies could result in substantial fines or penalties; employees could sue over unpaid medical bills or wages lost; additionally medical costs for work-related injuries can quickly accumulate; therefore a good workers’ comp insurer can assist your employees back onto work safely with appropriate coverage and care and coverage – providing care that leads to swift recovery for all involved parties involved.
Additionally, should an employee suffer a fatal work-related injury or illness, their beneficiaries will receive funeral costs and death benefits under workers’ comp policies. Disability benefits will replace part of lost income to cover living expenses while medical evaluation and treatment for any work-related illness will also be covered under workers’ comp policies.
Health insurance policies often do not cover work-related injuries, making a workers’ comp policy even if you’re the only employee essential. Workers’ comp policies tend to be much cheaper than health plans and it is easy to find affordable workers’ comp quotes online.
While costs for workers’ compensation policies will depend on various factors like state, payroll, job duties and claims history, it’s easy to compare online rates and select the most suitable policy for your business. An experienced business insurance broker is also on hand if any questions arise regarding this area of insurance. So do yourself a favor and purchase one today; accidents happen unexpectedly and don’t want you to be caught unawares. Simply Business offers free workers’ comp quotes.