The Small-Business Owner's Guide to Workers' Compensation Insurance

Chapter 2: How Workers' Comp Insurance Works
Part 5: How Does Workers' Comp Protect a Business?

A. Why Workers' Comp Makes a Difference

Occupational injuries are more than just a financial burden. They can hurt employee morale, put your operations behind schedule, and foster an unfriendly work environment.

Here are some ways Workers' Compensation Insurance can help manage these side effects of workplace injuries and illnesses:

  1. It protects employees from paying for work ailments. Imagine how hard it would be to retain your business's top talent if accepting a position meant they'd also accept any physical risks that come with the job. Most people look at jobs as a means of financial security — not a source for potential economic setbacks. Having adequate occupational injury coverage helps you attract employees and keep your team.
  2. It instills trust between worker & employer. When your employees know they can count on your company to help them when an unexpected work injury threatens their health, you build trust between your business and its workforce. Other employees will see how well your company cared for an injured worker, which builds morale — even in the aftermath of a tragic accident.
  3. It prevents business bankruptcy when injuries and illnesses happen. Workplace accidents are costly for employers, too. In fact, lost productivity from workplace injuries and illnesses totals $60 billion a year. In 2004, approximately 120 million workdays were lost, thanks to on-the-job deaths and injuries. (To learn more about these stats, read The American Society of Safety Engineers New browser window icon.' article Impact of Accident Costs on Businesses New browser window icon..) And what if you had to pay your employees' medical bills out of pocket, too? According to the National Council on Compensation Insurance, the average medical-only claim cost about $28,000. If you're like most small-business owners, you may not have that extra money lying around when a sudden slip-and-fall accident lands your employee in the hospital.
  4. It promotes a safe work environment. Carrying Workers' Comp is a given for most small businesses with employees. But every time a claim is made on your policy, your premiums may increase. Because you can't forgo coverage, but you also don't want your rates skyrocket, you have plenty of incentive to create a safer work environment for your employees. This might mean implementing safety-training programs for your subcontractors or purchasing ergonomic gear for your copywriters.
  5. It ensures your business complies with state laws. If you live in any state other than Texas, carrying Workers' Comp isn't just a wise business move — it's also your legal obligation as an employer.
Workplace injuries and illnesses account for $60 billion in lost productivity costs each year.
In 2004, about 120 million workdays were lost to occupational deaths and injuries.
In 2011, the average medical-only claim totaled $28,000.

Next: What Happens If I Don't Have Workers' Compensation Insurance?

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