Whether or not you need workers comp insurance for your company depends on the nature of the job and the employer-employee relationship. For owners of small businesses, it is a good idea to determine any exceptions that may be imposed by the state where your business is operating.
In California, for example, all companies with employees are required to have workers comp insurance. In Alabama and Florida, you need to have workers comp insurance as soon as you employ four or more people. In Texas, on the other hand, employers are not required to purchase workers comp insurance at all. However, Texas does require that employers explicitly inform employees that there is no coverage.
Regardless of the location of your business, it is a good idea to consider how workers compensation insurance can provide your business and your employees with financial and legal protection.
Most employees are allowed coverage under typical workers comp insurance policies. However, states commonly exclude the following:
- Business owners
- Independent contractors
- Casual or temporary workers
- Railroad or maritime employees
- Farmers, farmhands and other workers in most agriculture-based work environments
- Employees of private individuals
- Federal government employees (they are covered by the Federal workers compensation program, but not by the state program)
A worker's compensation program will generally cover the following:
- Cost of medical care for illness or injury
- Compensation for permanent injuries the employee may sustain
- Lost income during the employee's period of treatment and recuperation
- Cost of retraining the employee
- Benefits to beneficiaries in case the employee is killed while at work
Aside from permanent and long-term coverage for the injured employee, workers compensation also provides protection for any health issues and illnesses that may develop because of frequent and constant exposure to a work-related activity. Depending on the agreement with the employer, compensation may consist of regular payments or a single lump sum benefit.