Workers Compensation for Startups

If you have decided to start a new business venture it may be an exciting, but also stressful time in your life. Your priority, as a business owner, is to get up and running while making a profit. You had to worry about obtaining a space for your business, insurance for your business, all the licenses and certificates you may have needed, the list goes on and on. If you are at a point where you are ready to hire employees, that list is going to increase even more.

When you hire employees, you have a responsibility to protect them. That means making sure their working area, whether an office, store or job site is safe and clear of any harmful things. Unfortunately, you can't plan for every single thing and sometimes accidents happen in the workplace. Workers Compensation insurance for startups is an essential piece of your insurance portfolio that will help keep your business running smoothly. Workers Comp will provide coverage for your employees' lost wages should they experience a work-related injury or illness. It is certainly an insurance policy to consider as a startup business.

Do You Really Need Workers Compensation Insurance?

There may be some extremely rare cases where a startup is not going to have any employees. However, even in these cases depending on the industry, it may be required by a contract. For example, a contractor that is a sole proprietor with no employees may bid on a job for a general contractor, and that general contractor will require them to have Workers Compensation just because that is what is in their standard contract. In order to get the job, it will be something the contractor has to obtain. In addition to that, most states require employers to have Workers Compensation insurance, and you certainly want to be compliant with all state laws.

Startups often don't have employees right away either. Perhaps you are looking to work for a month without employees, then for that month, you would technically not need to have Workers Compensation. The minute that you decide to hire them, though, be sure to contact an experienced insurance agent to work with you to structure the policy for your unique situation.

Another big reason to carry Workers Compensation is to keep your good employees. Certainly, employees are working to support their family, so if they know there is a chance that they could get hurt and not be able to do that any longer, they want to have that peace of mind that there will be some money coming in. Work-related injuries can really devastate an employee and if your business does not carry the proper Workers Compensation insurance, you may be at risk for losing good employees. Think of it as an added benefit to them, rather than just another expense for you.

As we already mentioned, Work Comp pays for lost wages for your employees if they sustain a work-related injury or illness. Regardless of how the injury happens, the lost wages, medical expenses, and even disability and funeral benefits can be paid. The only caveat is that it has to have occurred as a result of their job. If an employee sustains a back injury at home and comes into work and hurts it even more, something like that would likely be excluded since it was a pre-existing condition.

• Medical Costs – There are times when there are small injuries that can be treated on the same day, such as a cut finger. Medical costs are an added benefit to the employees so that they can go back to work for you right away.
• Ongoing Costs – Some injuries require more medical attention than others. If the employee needs surgery or rehabilitation Workers Compensation will pay for these costs. Unfortunately, you are responsible for the work-related injury during their lifetime, even if they don't return to work for you.
• Death Benefits – While we hope that something as tragic as death never happens on the job, it does happen sometimes. Work Comp will provide funeral expenses, and sometimes even death benefits to their family.

Unfortunately, there is no average cost of Workers Compensation insurance because it is rated on a few factors that depend entirely on each business. The costs will vary widely from one industry to another. When you obtain a Workers Compensation insurance policy, you will be asked to describe the jobs that your employees do and to estimate their annual payroll. Each job class will have its own rate, and then that rate will determine the price along with the amount of payroll for each class. For example, an excavator class will have a higher rate than a clerical office class. Also, the more employees you have, the higher the insurance premium will be for your Work Comp policy.

The rates for each job class will vary from state to state, so one startup in Pennsylvania may have a different rate than California. The states will determine the rates based on the likelihood of claims and the severity of claim history. As a startup, you should have no claims history of your own which is good, but sometimes insurance companies want to know that you have experience in the industry you have decided to start a business in. If you have experience in the same industry than it should be no problem, but without any experience at all you may end up having to pay a little more until you get that experience under your belt.

Because you are a startup your priority is to make money, and that means cutting costs wherever you can. Often, business owners look to their insurance policies first to cut costs. While sometimes this can work out by changing coverage limits and deductibles, Workers Compensation is not usually a place you should be looking to reduce costs. Here are some things that can happen if you decide not to carry this critical coverage for your employees.

• Legalities in Your State – Most states require businesses to carry Workers Compensation coverage. There are different rules and regulations for each state. Some will only require it if you have a certain number of employees, some don't require small businesses to carry it, and some don't require it at all. It is best to check with an educated insurance agent that knows the state laws and can hold your hand through the process.
• Fines, fines, fines – Let's say you decide to ignore the fact that your state requires Workers Compensation because you don't want to pay for it so you can save money and have more cash flow. Besides, your employees are safe and careful and would never get hurt right? Even if they don't get hurt, if your state has the requirement to carry it for all businesses, you could face a ton of fines. Many states will fine you for each day that you don't have the policy. So, your money-saving idea could turn into a major issue and cost you more than if you had simply paid the insurance premium.
• Employers' Liability – While Workers Compensation insurance is designed to provide coverage for employees, it protects you as an employer as well. Even if you are a family business, there is no guarantee that they will not sue you. The defense costs for an employee-related lawsuit against you will be paid for under this policy. This tends to happen when the employee feels that you, as the employer, were negligent and that is why they got hurt. In addition to the defense costs, it will pay for settlements and judgments as well.
• Accidents Happen – You might think your business has no risk of injury or illness. Even employees who sit at a desk all day are at risk for injury. A common claim for Workers Compensation is carpal tunnel, caused by repetitive typing and writing. Also, if you leave something like an empty box in the walkway to the bathroom, there is a chance they could trip over it. Regardless of your industry, crazy things can happen and it is best to be prepared for it and able to support your employees. You will absolutely be held responsible if your employee is injured on the job, so avoid a lawsuit.

Starting a new business is such an exciting feeling, often squashed quickly by the dread of expenses. While insurance may feel like yet another expense that you don't want to pay, it is best to pay for it and avoid a hefty lawsuit. Your employees depend on you to provide not only their paychecks but protection from injury and illness. Work with an experienced insurance advisor to make sure you have the proper coverage in place. Coverwallet offers hassle-free quotes from the most experienced insurance agents, so give us a call today.