Law vs. contracts in workers' comp requirements: the law always wins
You’re probably familiar with the basics of workers’ compensation insurance. When an employee gets hurt or sick because of their job, workers’ comp benefits can pay for medical expenses and replacement wages. It’s also the only type of small business insurance most states require for businesses with one or more employees.
Seems simple enough. If your state requires workers’ comp insurance, you purchase it. If your state doesn’t require it, you’ll never need it, right? Not necessarily.
Let’s explore instances where you may need to carry workers’ compensation, even if you think you don’t.
Minimum workers’ comp coverage misconceptions
As we said, most states require an employer to carry workers’ compensation insurance if they have one or more employees. According to an Insurance Journal report, they must have the state-mandated minimum amount of workers' comp coverage to stay in compliance. There's just no way around that.
But what if your state doesn’t require workers’ comp (e.g., Texas)? The law may let you sidestep coverage obligations, but there are some situations where you may be forced to carry the policy to land work. For example:
- If a client contract requires your business to carry workers’ comp Insurance and state law doesn't, you would need to carry it to meet the contract requirements.
- If you want a subcontractor to carry workers’ comp and state law doesn't require it, that subcontractor has to carry it to get the job.
- If state law requires workers' comp but a contract doesn't, you’re still required to carry the appropriate coverage.
Basically, a contract may have more stringent coverage requirements than your state laws, but a contract cannot relieve you of complying with state requirements. You can’t use a contract to allow you to provide less coverage than is required by law.
Many states, many workers’ comp questions
At Insureon, we receive many questions about workers’ comp from small-business owners. We get it. workers’ compensation can be confusing and complex – especially when regulations vary from state to state.
The good news: we have an abundance of workers’ comp resources that can help you better understand this policy and your state's requirements. Get your sleuth on:
- Find a summary of your state’s statutes in our guide “Workers’ compensation laws by state.”
- Learn more about the policy in “Workers’ compensation basics for employers.”
- Get a cost estimate with our workers’ compensation insurance cost analysis.
Still have questions? Talk to your insurance agent about the ins and outs of workers’ comp coverage.
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