If you’re in business and you have employees, you need Workers Compensation Insurance.

This Ultimate Guide contains comprehensive information about “Workers’ Comp,” what it covers—and doesn’t cover—along with some situations where a business might need it. We’ve also provided suggestions on where to find the best Workers’ Comp insurance for your business to assist in making an informed decision.

What is Workers' Compensation Insurance?

Workers' Compensation Insurance covers the medical costs and lost wages when employees are injured on the job or get sick from performing their jobs.

Each state has its own laws and regulations, but businesses, large or small, are generally required to secure Workers' Comp Insurance as soon as they hire their first employee.

In many situations, when an employee is hurt on the job, they forfeit their right to sue their employer over the workplace injury in return for being compensated through Workers’ Comp. This arrangement makes it beneficial for both employers and employees.

What Does Workers' Compensation Insurance Cover?

Workers Compensation Insurance covers claims from employees who are hurt on the job. These claims may include short and long-term work-related injuries, medical expenses, loss of wages, rehabilitation expenses, and in extreme circumstances–death benefits.

If an employee sues, your Workers’ Comp insurance is also there to help cover some of the legal fees in addition to your General Liability Insurance.

What Doesn’t Workers' Compensation Insurance Cover?

In general, Workers' Comp doesn’t cover injuries occurring at recreational events, like team building activities, or after-work happy hours.  Injuries resulting from on-the-job horseplay are also not covered by Workers’ Comp.

Additionally, Workers’ Comp Insurance does not cover "coming and going" injuries, e.g. injuries that happen on an employee’s way to or from work—with exceptions. If the accident or injury occurred during working hours and on behalf of the business, an employee can file for Workers’ Compensation benefits.

What's a Situation Where You Would Need Workers' Compensation?

If you have employees, there are countless situations where Workers' Compensation Insurance is needed. Here are just a few examples of workplace accidents:

• A barista working at your café scalds himself with hot coffee, resulting in 2nd and 3rd-degree burns on his hands and arms. Unable to work for several months, he’ll need extensive medical attention for his injuries.
• A decorator at an interior design company falls off a ladder while hanging curtains, breaking her arm and shoulder. Her injuries require surgery and she's unable to work for the foreseeable future.
• A janitor working for your cleaning business slips on a wet floor while on the job. He sustains a concussion and is hospitalized with serious internal bleeding.

In all these instances, Workers’ Compensation Insurance would cover the cost of medical treatment, physical therapy, and/or long-term care of the injured employee. Moreover, Workers' Comp protects the employer from substantial medical or bodily injury damages.

Lastly, employees will receive up to two-thirds of their normal salary from Workers' Comp while rehabilitating from their injuries.

How Much is Workers' Compensation Insurance?

Like all insurance policies, there are variables that affect its price. Total payroll wages (including bonuses and holiday pay), industry classification, and the experience of your business all factor into the cost of a Workers’ Compensation Insurance policy.

On average, a small business with just a few employees can expect to pay between $2k and $3k annually ($160 - $250 per month).

Who Needs Workers' Compensation Insurance?

Every business that hires employees must carry Workers' Comp Insurance. Depending on the state, if you hire independent contractors, you may still need Workers' Comp insurance.

Who Doesn’t Need Workers' Compensation Insurance?

Independent contractors, sole proprietors, and single-member LLCs do not need Workers’ Comp Insurance unless they begin hiring employees.

Where Can You Get Workers' Compensation Insurance?

Workers' Compensation Insurance is available from numerous insurance providers — brick and mortar as well as online. We've partnered with Next Insurance and their rates start at just $25 per month. Use our partner link to get a free quote.

Learn more about 12 other types of insurance. Take a look at our Ultimate Guide to Selecting Business Insurance.

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