Insureon Blog

What happens if I don’t have worker’s compensation insurance?

30. May 2014 08:48

When a small business owner decides to forgo worker’s compensation insurance coverage, they pay the price. Worker’s Comp pays benefits to employees when they suffer occupational injuries and diseases. This coverage is deemed so crucial to workplace safety that most states require employers to carry it.

So what happens when employers break workers’ compensation laws? Not only are they fined, but they are also still responsible for the costs of workplace injuries and illnesses. Plus, they might have to foot the litigation expenses if they are sued for the accident.

Let’s take a look at the high price of not carrying Workers’ Compensation coverage in more detail.

Worker’s compensation insurance fines in New York

Every state (except for Texas) requires that employers carry Worker’s Compensation Insurance for their employees. Because each state’s laws are different, the fines for violating these laws vary, too. (Learn more here: Workers’ compensation insurance laws by state.)

To give you an idea of the nature and cost of these fines, we’ll look specifically at one state: New York. Here is a selection of Workers’ Comp noncompliance fines, as outlined in the state’s employer’s handbook:

Additionally, New York employers who fail to secure coverage are responsible for all legal expenses for defending themselves against workers’ comp claims. (This cost is usually covered by workers’ comp policies.) These employers are also responsible for paying all medical and wage benefits that are awarded to injured employees. There is no cap to these charges. Read on to learn more about the average cost of these expenses.

The high cost of medical and legal bills for small business owners without workers’ comp

Employers are, in general, responsible for paying for their employees’ workplace injuries and illnesses – even if they live in Texas (the only state that doesn’t legally require coverage). So even if you don’t carry workers’ comp, a judge will probably still find you liable for your employees’ medical and wage replacement expenses. You’ll also have to pay your legal defense costs.

To paint a picture of these staggering expenses, take a look at the following numbers:

As a final example, let’s imagine that you run a business in New York. An employee files a workers’ compensation claim for an occupational accident only to find out you don’t have coverage.

You have seven employees, which totals $15,000 in fines for not carrying coverage. Your employee sues for medical expenses and lost time. All told, your trial costs $60,000 and the judge awards the injured employee $28,000 for medical and lost-wage benefits. Your total cost? $103,000.

Want to learn more about workers’ compensation insurance and what affects your rates? Check out our workers' comp insurance cost analysis.


Risk Management | Small Business Risk Management | Workers' Compensation Insurance

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