payroll services

How important is workers' compensation to a business?

Workers' Compensation is a form of insurance that provides medical coverage and wage replacement in case the employee gets injured on the job.  In our modern day and age, it is expected, at the very least, that every business should provide a safe working environment for their employees, ideally free from any risk of injury or illness.  Unfortunately, in the real world, there's always risks, and when accidents do happen workers' compensation exists as a way to not only compensate for the employee's injuries, medical costs, or lost wages but to also protect your business from legal consequences.  The employee waives the right to sue the employer given that they are given the workers' compensation insurance.  As with any type of insurance, especially ones concerning health, the premiums for such policies can oftentimes be significant.  Of course, the cost of such premiums depends heavily on what type of industry the business is practicing in, as one would certainly expect a construction business carries more risk of injury than say, one practicing in an office environment.

Skipping out on providing workers' compensation is illegal in many states.  Workers' compensation insurance is state mandated in 49 out of 50 states in some form or another.  Texas is the only state where worker's compensation is not explicitly required, the exception being workers of companies on contract with government must be covered.  The specifics between each state varies; the workers' compensation laws are not consistent within all the other states.  In most states, all businesses with at least one employee are required to carry the insurance, while states like Alabama and Missouri require on coverage if the business has at least five employees.  Within the state worker's compensation laws not all companies are treated the same.  In Tennessee, for example, companies in the coal and construction field must cover all employees, while all other business are only required to cover if they have more than 4 workers.  In all states, companies are free to choose worker's compensation insurance from a commercial provider, and in most states, some companies may be approved to self-insure their employees.  Lastly in some states Rhode Island and Kentucky, businesses may purchase the coverage through a state-administered fund.

The consequence of not covering workers with workers' compensation is the incurrence of heavy fines and possibly time in jail.  Here in California, if a employer fails to provide workers' compensation, the California Division of Labor Enforcement Agency will step in and issue a stop order and fine the employer up to $10,000.  Additionally if an injured worker files a claim and the employer fails to provide insurance, the employer will be met with a fine of at least $10,000 and upwards to $100,000. 

One of the most important aspects of running a business that many may not know of, is handing the workers' compensation insurance.  It's always better to be on the safe side and secure your workers' compensation insurance so you can have the peace of mind of focusing on the main directives of your company, than running into the unnecessary risk of legal problems.  We here at Imaco Underwriters understand the importance of the balance of cost and service and the choices that could ultimately impact you and your clientele's future.  We are here to help you structure and price submissions so you can help manage the risk of your client's business.