As a business owner, you should know the ins and outs of workers’ comp before choosing a provider or switching policies.
Unfortunately, there’s a lot of misinformation out there. Before doing any further research on the specs of different insurance plans, make sure you haven’t fallen prey to any of these common myths surrounding workers’ comp.
Myth #1. Workers’ Compensation is Optional
Aside from a few circumstantial exceptions, every business in any U.S. state other than Texas must have workers’ comp insurance. (Even within Texas, companies in certain industries, like construction companies with government contracts, must provide coverage.)
State requirements for workers’ comp insurance apply to large and small businesses alike; in many states, even having one employee counts as running a business and requires owners to buy into an insurance fund.
Myth #2. Every States Has the Same Laws and Regulations
Workmans compensation laws vary by state, meaning there is no common federal policy that sets the rules and regulations for workers’ comp coverage.
Most significantly, some states have competitive state funds for workers’ comp, and others have monopolistic state funds. Your state’s policy will dictate what options you have for buying insurance.
In states with competitive markets, you can opt to purchase coverage from a private insurer. If your business operates within a state with a monopolistic state fund, you can only choose between the state fund and self-insurance.
In addition, different states have varying statutes of limitations.
Myth #3. Workers’ Comp Doesn’t Matter for Small, Safe Businesses
In some states, for example, Alabama, you can employ up to five workers before having to buy into a workers’ comp fund. But generally speaking, the size of your business doesn’t impact the importance of workers’ comp.
Think of it this way: If you have thousands of employees, numerous accidents are bound to occur, making workers’ comp an essential safety net. On the other hand, if you run a business with just ten employees, a single accident could break the bank if you had to pay for medical expenses out of pocket.
While some industries have more associated risks than others, workplace illnesses and injuries can take place at any time in any setting. Just because you don’t have employees operating heavy machinery or working with dangerous chemicals doesn’t mean workplace accidents won’t happen.
Myth #4 If I Buy Insurance, It Covers Everyone
Purchasing a workers’ comp insurance plan will cover the majority of your workers. However, a few exceptions exist, so you should always study policy details thoroughly before picking a plan.
For example, some workers’ comp policies cover you as an employer while others do not. In general, workers’ comp covers part-time employees, but not independent contractors or volunteers. If you live in a state with a monopolistic state insurance fund, you will likely have to purchase insurance separately for any out-of-state employees.
Myth #5. If an Accident Occurs Off-site, Workers’ Comp Doesn’t Cover It
In general, workers’ compensation insurance covers on-site injuries regardless of whether the employee is on the clock or not. However, state regulations and private insurer policies vary, so it’s essential to know the ins and outs of your coverage plan and relay this information to your workers.
Furthermore, workers’ comp typically covers incidents that occur off-site if the employee is performing a work-related task. As an employer, you should be clear with your staff about what constitutes official off-site work.
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Myth #6. Workers’ Comp Only Benefits Employees
When it comes to workers’ comp insurance, it may seem like all the benefits go to your employees. After all, when an accident occurs, it’s their medical bills and disability wages that the insurance covers. However, keep in mind that workers’ comp protects you, too.
Without it, you’d be responsible for paying these expenses. Also, many workers’ comp policies include employer liability. Should an employee take you to court over an injury or illness, your insurance will help cover attorney fees and settlements.
Clarifying Workers’ Compensation
Like all other types of insurance, workers’ comp coverage can be complicated. The fact that each state has its own laws further complicates the matter. With these common myths expelled, you can now continue your research to find the right workers’ comp coverage for your business.
Image Credit: by envato.com
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