Workers’ Compensation Insurance pays for three things with an employee injury: medical bills, recovery costs, and partial missed wages. If an employee dies, Workers’ Comp can cover funeral costs and benefits to the worker’s family. Depending on state laws and contract requirements, you may need this policy to cover employees, contractors, freelancers, or even yourself.
What is Workers’ Compensation Insurance?
Workers’ Compensation (formerly “workman’s comp”) emerged from a “grand bargain” between business owners and workers. Being sued by injured worker tired business owners and the workers.
So Workers’ Compensation Insurance helps pay for work injuries and illnesses without the rigmarole of a lawsuit. This liability insurance policy can help your business do three things:
- Pay for medical expenses and replacement wages when injuries affect employees.
- Comply with state Workers’ Comp laws.
- Pay for legal expenses if an employee sues over a work injury the policy doesn’t cover.
Most states require employers to buy Workers’ Compensation Insurance as soon as they hire their first employee. Even when that’s not the case, it’s smart to have this policy, because the cost of workplace injuries is substantial:
- The average workplace injury claim costs $36,551, according to the National Safety Council.
- Recovering from a workplace injury took a median of nine days in 2014, according to the Bureau of Labor Statistics.
- Productivity losses come to about $2,660 per hourly worker, according to a report from workforce solution company Circadian.
The takeaway: workman’s comp injuries cost small businesses in lost productivity. Without insurance, employee medical expenses and missed waged would compound those losses.