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Workers' Compensation Insurance
Almost every state requires this policy for businesses that have employees.
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Workers’ compensation insurance

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Workers' compensation insurance

Workers’ comp insurance covers medical costs for work injuries and illnesses. Almost every state requires employers to carry this policy.

Workers’ comp protects employees and employers

A workers’ compensation policy is a safety net that helps your business and your employees recover from work injuries and illness. That includes everything from a minor injury to a broken bone from a fall.

It lets your company take care of your injured workers by paying for their medical bills, disability benefits, and other related costs. And if the employee sues, it’ll cover those costs too.

Does your company need workers’ compensation insurance?

If you have employees, you’ll probably need workers’ comp insurance (along with other types of business insurance, like general liability insurance). The good news: this policy is very affordable – workers' comp costs an average of only $36 per month for small companies.

But there are plenty of reasons besides the law to invest in a workers’ comp insurance policy. Here’s why every company should consider this coverage:

Workers’ comp is required by law

Most state laws require business owners to purchase workers’ comp as soon as they hire their first employee. Other states require coverage when a business has a certain number of employees. Some states allow businesses to self-insure, or get approved to pay for workers' compensation claims out-of-pocket.

In Florida, for example, you’ll need this policy when you hire four or more employees. Texas is the only state that doesn’t require this coverage.

Make sure you know the workers’ compensation laws in your state – and in your employees’ states. If you don’t comply with state workers’ comp requirements, you could face fines or even jail time.

Workers’ comp pays medical bills

Workers’ comp coverage helps small businesses support their most valuable asset – your employees. This policy ensures that injured employees get full medical care and return to work better than ever.

Most health insurance policies have exclusions for injuries related to work. Given the high cost of health care, even sole proprietors, contractors, and subcontractors should consider carrying workers' comp.

Professionals who use their hands, like in computer repair, face the highest risk. Anyone who uses tools knows how easy it is to slip up and hurt yourself.

The work you and your staff do every day like typing, pointing and clicking, and even staring at your monitors can cause health issues. Conditions like carpal tunnel syndrome, tendinitis, or chronic headaches can develop over months or years in an office environment.

Workers’ comp gives every employee the opportunity to get proper medical treatment, even if they can’t pay for it on their own. That includes everything from medications to physical therapy.

Workers’ comp pays for employee lawsuits

Lawsuits can eat up your time and money. The average workers' comp claim costs about $42,000. When your employees accept workers’ compensation benefits, they give up the right to sue your business – which helps you avoid these costs.

If an employee does decide to sue, you’re still covered. Workers’ compensation insurance typically includes employer’s liability insurance. This coverage pays your legal costs if an employee claims your negligence caused their injury.

Many small companies don’t have the funds to weather an employee lawsuit. That means workers’ comp is a good investment even if your state doesn’t require coverage.

What does workers’ compensation insurance cover?

Injured man holding knee with images of an x-ray and medical bills

When an employee’s repetitive stress injury, occupational illness, or workplace accident requires medical attention, workers' comp covers costs including:

  • Ambulance rides, doctor visits, and hospital bills
  • Medications and physical therapy
  • Paying employees partial wages while they recover
  • Death benefits for fatal injuries

Say, for example, that a project manager damages their eyes from spending years in front of screens at your company. They go to see an optometrist.

Your workers’ comp insurance covers the appointment and any necessary follow-up. If the project manager needs to take time off work to recover, your policy will also pay part of their wages.

Workers’ comp covers any on-the-job injuries, in your office or anywhere else – including at employees’ homes. It provides benefits for all full or part-time employees, but not typically for contractors or business partners.

Workers’ comp will cover any reasonable claim, regardless of who caused the accident or injury.

Learn more about workers’ compensation coverage.

Does workers’ compensation prevent employee lawsuits?

Workers’ compensation insurance helps employers avoid work injury lawsuits, since workers don’t have to take you to court to recover their medical costs and wages.

To prevent double-dipping and ensure a win-win for you and your employees, injured employees must agree not to sue your business when they accept workers’ comp benefits.

If your policy doesn’t pay out as much as injured employees want or think is fair, they can refuse their workers’ comp benefits and sue your business for personal injury instead. Luckily, workers’ comp policies usually include employer’s liability insurance to cover the cost of these lawsuits.

Businesses in North Dakota, Ohio, Washington, and Wyoming must purchase workers’ comp through a state fund – and these policies don’t include employer’s liability insurance. That leaves you vulnerable to employee lawsuits. To fill this gap in coverage, you can buy employer’s liability insurance from a private insurance company.

Workers’ comp is a no-fault system, meaning you don’t have to worry about who’s to blame when it comes to a work-related injury. Once a workers' compensation claim is approved, your worker will have their medical bills covered. And in exchange, they give up their right to sue you.

How much does workers’ compensation cost?

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Small business owners don’t pay a lot for workers’ compensation insurance. The average small business pays just $36 per month, or $436 per year, for workers’ comp.

Insurance costs vary based on your business details and coverage options, such as:

  • How many employees you have
  • How much insurance coverage you need
  • Where you do business
  • Your claims history
View Costs

How can you reduce the risk of workplace injuries?

A safe workplace means less risk of employee injuries. Businesses that emphasize workplace safety are also less likely to make a claim on their policies. That helps keep the cost of workers’ compensation insurance coverage low.

There are simple steps you can take to reduce hazards. Encourage your employees to stretch and take frequent breaks. And make sure to provide an ergonomic setup with good lighting. This can prevent repetitive stress injuries along with eye strain, headaches, and other common complaints.

Finally, don’t underestimate clutter control. Remove loose rugs, tape down wires, and keep your office ship-shape to avoid accidents that could land an employee in the ER.

Even a minor mishap can lead to major medical expenses. That’s why it’s so important to take precautions – and get insured.

Learn more about workers’ compensation insurance