When Should a Business Consider Workers' Compensation Insurance?
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The Best Time to Buy Workers' Compensation Insurance

Say you run a cleaning business on your own. Business is booming, and clients continually recommend you to their friends and coworkers. Seeing an opportunity for growth, you make the decision to expand by hiring two employees to share the workload.

Because your business is growing, now is the time to talk with your insurance agent about Workers’ Compensation Insurance. Laws vary from state to state, but in most cases, as soon as you hire your first employee, your business needs to purchase a Workers’ Comp policy.

Why Employees & Workers' Comp Go Hand in Hand

As an employer, it's your responsibility to keep your employees safe. So when they are hurt on the job, their medical expenses are your responsibility. And that's why most states require employers to carry Workers' Comp Insurance for their employees. The coverage pays for medical, disability, death, and wage replacement expenses associated with occupational injuries.

Having said that, most every state has its own version of Workers' Comp laws. For example, in California, state law requires employers to have WC Insurance if they have even one employee. In South Carolina, you must have four employees before you're required to carry coverage. Texas, on the other hand, is the only state where Workers’ Comp is optional.

So when do you really need to purchase that Workers’ Comp policy? We recommend…

Workers' Comp State Laws by Industry

In some cases, Workers’ Comp rules also vary by industry. For example, many construction businesses are required to have coverage sooner than office businesses.

Construction is a high-risk work environment, which increases the chance of workplace injuries. That's why a construction business in Florida with one or more employees (including the employer) is required to carry Workers’ Comp coverage. By contrast, a non-construction business in Florida must obtain a Workman's Comp policy only when it has four or more employees.

Many states exempt farm laborers, family members, and seasonal workers from Workers’ Comp obligations, too.

Final Thoughts on Your Workers' Comp Obligations

Granted, Workers' Comp laws are tricky. There are many exceptions and rules that vary depending on what you do and where you live. That’s why it’s so vital to verify your state’s requirements, especially if you…

  • Have employees working in multiple states.
  • Want to expand your workforce.

If you have questions about your Workers’ Compensation obligations, talk to your insurance agent or seek out your state’s dedicated Workers’ Comp site. To learn more about when to purchase a policy, read “When Do Small Businesses Need Workers’ Comp?

Workers' Compensation Insurance: Further Reading

Workers' Compensation in the Insureon Blog