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Workers’ Compensation Insurance
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What is workers’ compensation insurance?

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Workers' compensation insurance

Workers’ compensation insurance is required in almost every state for businesses that have employees. It can cover medical costs and lost wages for work-related injuries.

When does a small business need workers’ compensation insurance?

A small business is usually required to purchase workers’ comp as soon as it hires its first employee. However, workers’ compensation laws vary by state.

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Workers’ compensation insurance is essential for three reasons:

  • Workers’ compensation is often required by state law.
  • It pays for an injured employee’s medical expenses and partial lost wages.
  • Most policies include employer’s liability insurance, which protects business owners from lawsuits related to workplace injuries.

When employees elect to receive workers' comp benefits they usually agree to not sue their employers. Learn more about what workers’ comp covers.

Workers’ comp insurance protects against costly workplace injuries

U.S. employers collectively pay more than $1 billion per week for serious, nonfatal work injuries, according to Liberty Mutual. Even when workers’ comp is not required, it can protect businesses from the high cost of medical expenses associated with on-the-job injuries. Without workers’ comp, a business owner could end up paying those costs out of pocket.

Sole proprietors and partners with no employees are usually exempt from workers’ comp requirements, but they can still choose to purchase it to protect themselves. Additionally, clients may require you to purchase this policy to limit their own liability.

Does workers' compensation cover employees who contract COVID-19?

Workers' comp insurance protects employees from on-the-job injuries and illnesses. If an employee contracts the coronavirus because of their work (for example, doctors and nurses), then this policy should provide coverage. However, it doesn't usually cover diseases that are unrelated to employment.

Workers' compensation laws vary dramatically by state, so it's possible your state's laws will help cover costs related to COVID-19. If you think you might be eligible for a claim, contact your insurance provider's claims department.

Workers’ compensation insurance costs

Male business owner calculating number of employees and other factors

Workers’ comp costs vary depending on where your employees are located and the type of work they do. A low-risk office worker will cost less to insure than a roofer. Factors that impact the cost include:

  • Payroll
  • Location
  • Number of employees
  • Industry and risk factors
  • Coverage limits
  • Claims history
View Costs

Learn more about workers’ compensation insurance

Is workers’ compensation insurance required by law?

In most states, workers' compensation is required by law as soon as a business hires its first employee. Learn about the laws and requirements in your state.

Do self-employed or independent contractors need workers’ compensation insurance?

Typically only businesses that hire employees are required to purchase workers' compensation insurance. However, individuals who are self-employed or independent contractors may decide to purchase this policy to fulfill the terms of a contract or to protect their income. Learn more about workers' compensation for self-employed or independent contractors.

What is employer’s liability insurance?

Employer's liability insurance is usually included in a workers' comp policy. This coverage protects business owners against lawsuits claiming that an employee was injured due to your negligence. Learn more about employer's liability insurance.
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