Best Workers Comp Insurance for Small Business • Benzinga

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Even the safest workplaces present risk. Workers’ compensation insurance protects your workers as well as your business.

Start with Benzinga’s guide to learn how workers’ comp insurance for small business works.

Small Business Workers Comp Insurance: An Overview

Workers’ compensation insurance helps pay for the care employees need if they experience a work-related injury or illness. Small businesses will need to contact insurance providers for quotes to secure workers’ compensation insurance.

The main difference between workers’ comp for small businesses versus larger employers is that in some states, very small businesses may not be required to purchase workers’ compensation.

How Does Workers’ Compensation Law Work?

Workers’ compensation law varies significantly from state to state. Texas is the only state where workers’ compensation isn’t mandatory. Some states offer exceptions for very small businesses.

For example, in Alabama, organizations with less than 5 employees aren’t required to carry coverage. In Georgia, businesses with less than 3 people are exempt.

Workers’ compensation laws evolved to ensure employers treat employees fairly if they experienced a work-related injury or illness. Employers liked workers’ compensation laws because the laws protect them from most lawsuits around work-related injuries. As long as employers are compliant with workers’ compensation law in their state, employees typically can’t sue them.

Medical and Vocational Benefits

Workers’ compensation pays the medical costs for employees with a work-related illness or injury. Benefits typically include:

  • Medical care, including doctor’s visits or hospital care
  • Prescription reimbursements
  • Mileage reimbursements for travel to and from medical appointments

Workers’ compensation also helps employees get back to work. Some states offer vocational rehabilitation. This helps workers retrain if they’re no longer able to work in their pre-injury jobs.

Types of Workers’ Compensation Claims

State workers’ compensation laws vary in terms of benefit amounts, where businesses can purchase insurance and what injuries and illnesses are covered. In general, workers’ compensation offers these benefits:

  • Medical-only claims. The majority of workers’ comp claims fall into this category. A worker might have a minor injury like a burn or a cut and need medical attention, but they don’t need to take enough time off to trigger disability benefits. There’s typically a waiting period of 3 to 7 days before lost-time benefits are paid, and minor injuries may not require that much time off work. In these cases, workers’ comp covers medical care but not lost wages.
  • Temporary total disability claims. Employees may need more time off to recover before returning to work. If they’re unable to return to work in their pre-injury job or another job with the same employer, they may be eligible for temporary total disability benefits. Most workers’ compensation plans pay ⅔ of the employee’s pre-tax income. The lower pay is because workers’ compensation benefits aren’t taxable. Most states have a minimum and maximum benefit amount, and they vary significantly depending on where you live.
  • Temporary partial disability claims. Sometimes employees may be able to work reduced hours or in another position with lower pay. In these situations, employees may be eligible for temporary partial disability benefits. These benefits help make up for their lower income.
  • Permanent disability claims. In some cases, employees may not be able to return to work. Depending on the injury or illness, they may be eligible for permanent partial or total disability. Permanent partial disability benefits are for employees who may be able to work in some capacity. Total disability benefits are for employees who will no longer be able to work.
  • Death benefits. Workers’ compensation plans also pay death benefits to cover funeral and burial expenses. Dependents and family members are paid benefits as well.

Injuries That Aren’t Covered by Workers’ Comp

While workers’ compensation covers most workplace injuries, there are some exceptions, which include:

  • Injuries caused by horseplay
  • Injuries caused during a criminal act
  • Self-inflicted injuries
  • Injuries that occurred while intoxicated
  • Injuries during a voluntary, off-duty recreational activity
  • Injuries that occur after being laid off or terminated

Small Business Workers Comp Insurance Cost

Workers’ comp insurance costs for small businesses are based on several factors.

  • The type of work. Insurers look at the risks involved in the work you do. They assign your business a class code from the National Council on Compensation Insurance.
  • How much employees are paid. Workers’ comp insurance is priced based on each $100 of payroll. The higher your payroll, the more your workers’ compensation will cost.
  • Where your business is located. State laws vary, so insurance costs vary as well. States may also add taxes and fees.
  • Your claims history. If you have a claims history, your costs may increase or decrease depending on how your claims compare to other similar businesses. This is called an experience modifier.

The formula for determining workers’ compensation insurance costs is:

Class Code Rate X Experience Modifier X (Payroll/$100) + State Taxes and Fees

While that might sound expensive, costs for workers’ comp insurance have been declining. A study by the state of Oregon showed the average costs in 2020 as $1.02 per $100 in payroll, which is down from $1.11 in 2019.

Best Small Business Workers Comp Insurance

Here are Benzinga’s picks for the best workers’ compensation insurance.

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