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Workers' Compensation Insurance

Employers often have to carry Workers’ Compensation Insurance (also known as Workers’ Comp) for all their employees, but many tech companies have a mix of fulltime staff and nontraditional staff that includes contractors, subcontractors, freelancers, and consultants.

This melting pot can lead to confusion about Workers’ Compensation requirements. Do you need insurance for interns? What about the freelance developer you just brought on?

The short answer to those questions: it depends. Each state has its own Workers’ Comp laws. And each business is a little different. We’re here to shine light on the Workers’ Comp liabilities that might crop up for IT freelancers, software development businesses, and other technology companies.

What Is Workers’ Compensation Insurance?

Put simply, Workers’ Compensation Insurance is coverage that can pay for work-related injuries and illnesses.

In some industries, the risks are obvious. Firefighters face the possibility of severe burns and smoke inhalation. Lion tamers are at risk of getting mauled by lions. But what about IT?

The Bureau of Labor Statistics has data [PDF] on common workplace injuries that cause employees to miss work. In general, Workers’ Comp injuries in the information technology industry are about 40 percent lower than average. That’s good news. Your work is less risky than a construction worker’s. But that doesn’t mean IT workers don’t suffer Workers’ Comp injuries.

Combing through the BLS data, we found that the three most common nonfatal injuries for the tech worker are:

Falls: 11.5 out of 10,000 workers.

Contact with an object (we think this means running into doors while looking at your phone): 10.2 out of 10,000 workers.

Transportation incidents: 5.4 out of 10,000 workers.

These types of injuries share a common denominator: they’re the kind of accident that can happen anywhere. If a sys admin trips over a network cable, that could be a Workers’ Comp claim. If a developer gets in a car accident while picking up Starbucks for the office hackathon, that could be Workers’ Comp claim.

Bottom line: workplace injuries happen in every industry – not just the dangerous ones.

What Does Workers’ Compensation Cover?

As a business owner, it’s important to realize that any injury that occurs at or because of work could lead to a Workers’ Comp claim. And when we say “any injury,” we mean any injury.

If an employee tears her ACL while running errands for the business or suffers a concussion after falling head-first into a desk (maybe because the Starbucks guy wasn’t back yet), you could be liable for the injury.

When an accident like that happens, Workers’ Compensation Insurance may pay for:

  • Employee medical bills.
  • Ongoing physical rehabilitation costs.
  • A portion of lost wages.
  • Death benefits for the family if the worker dies.

The BLS data also tells us that when an IT worker has a workplace accident or injury, it usually causes them to miss about 12 days of work. That’s part of what makes Workers’ Compensation Insurance valuable to any IT business owner. It covers not only the immediate cost of an accident, but also the employee’s wages for the time they’re out.

Let’s assume that the average IT employee makes $60,000 to $90,000 per year. If they’re out for 12 days, you still owe them $2,000 to $3,000 – and you’ve lost more than two weeks’ worth of productivity.

That’s the real magic of Workers’ Comp: when someone on your team is hurt, your coverage means you can take care of them and make sure they get paid without affecting your bottom line.

Workers’ Compensation Insurance for Independent Contractors, Subcontractors, Freelancers, and Consultants

According to the Insurance Information Institute, most states view uninsured contractors, freelancers, and subcontractors as regular employees. Translation: if your contractor gets hurt, you can be liable.

Of course, it’s not always clear-cut. Laws vary by state, and there’s some wiggle room for how courts interpret them. (But let’s face it, you probably don’t want to end up in court over this.)

Independent contractors fall into a gray area for Workers’ Compensation Insurance. They’re not technically employees, but the law could hold you responsible for their injuries. The bottom line: you don’t want to risk being liable. If you’re going to hire contractors…

  • Work with IT staffing agencies that provide Workers’ Comp for their contractors, OR
  • Add contractors to your Workers’ Compensation Insurance.

Not sure whether your state laws require you to cover contractors? Scroll down to our section on state Workers’ Comp laws.

Workers’ Compensation Insurance for Startups

If you’ve ever worked at a startup, you understand that rapid-growth businesses are exhilarating, but they have more than their fair share of growing pains.

When you’re hiring new employees every month, it’s essential to make sure your infrastructure keeps pace. From a business insurance perspective, that means making sure your policies are the right size for your business.

As you add to your staff, talk with your agent to ensure you have enough Workers’ Compensation Insurance to meet your state requirements and cover new employees.

How Much Does Workers’ Compensation Insurance Cost?

Remember how we said that IT workers have less risk of injury than construction workers? The good news is that your low risk translates to lower premiums. But beyond relative pricing, it’s difficult to give estimates for Workers’ Comp.

Each state has different laws and therefore different coverage standards. Further, every employee is classified by the type of work they do to assess premiums. If one guy on your team is hunched over his desk all day and another one is out setting up servers, they’re going to have different classifications and cost different amounts to insure.

Still, it’s helpful to have a ballpark number in mind. Broadly, you might expect coverage in the following ranges (all prices are yearly):

IT contractors / one-person businesses:

$641 to $1,110

Small IT companies (2 to 7 employees):

$2,441

Large IT companies (15 to 60 employees):

$11,000

Workers’ Compensation Insurance vs. Employer’s Liability Insurance

Workers’ Compensation Insurance typically also includes a coverage called Employer’s Liability Insurance, which can protect you if an employee sues you over their work-related injury.

Theoretically, when you cover an employee’s medical bills with Workers’ Comp, you’re already protected from liability. That’s why you have Workers’ Comp. So why do you need extra lawsuit protection? Because, in some cases, an employee might claim you were willfully negligent and should be liable for damages beyond the cost of their care.

For instance, if you tell an employee to climb a rickety ladder to change a lightbulb and the employee falls, breaking a leg, he might allege that you should have guessed that the ladder was dangerous (I mean, why didn’t you climb it yourself?) and sue you for negligence.

Or say you tell one of your employees to open up a desktop case, but you forgot to disconnect it from the power source, resulting in an electrical injury.

Plus, in some states, certain types of workplace injuries and illnesses are not eligible for Workers’ Comp benefits. For ineligible injuries, employees may sue employers to cover their medical bills.

For these cases, Employer’s Liability Insurance may offer extra protection.

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TechInsurance, an Insureon brand, is America's top technology insurance company. Through TechInsurance, IT businesses and contractors apply for insurance coverage and receive multiple quotes from leading insurance carriers including CNA, Zurich, The Hartford, Philadelphia, Travelers, ACE, USLI, and Hiscox. We offer technology companies a variety of insurance protection, including: General Liability Insurance, Professional Liability, Errors & Omissions, Excess Liability, Commercial Umbrella Insurance, Workers' Compensation, Fidelity Bonding, and more. (CA License #0G11129)