Starting a business? Then you've probably heard the insurance speech and how you need to protect it. Yes, you do need liability coverage in case a client or customer slips and falls on your premises. You do need commercial-property insurance in case there's a fire or other devastating event at your location. And, yes, if you have employees, you do need workers' compensation insurance.
In fact, for most businesses, even small ones, it's the law. What does workers' comp insurance protect you from? One of the largest threats to your venture -- your own employees and the possibility that they'll be injured on the job.
Related: 9 HR Basics for Any Small Business
Consider these scenarios: What if one of your account executives falls down the stairs and breaks his or her leg? Or what if the office secretary develops carpal tunnel? Without protection for your business, you might find yourself in a courtroom. Workers' compensation insurance is designed to keep you out of the courtroom by providing fixed monetary awards when employees are injured or disabled.
What is Workers Compensation Insurance?
Workers' compensation is a form of insurance that covers the medical and rehabilitation costs of your employees, as well helping to replace lost wages, if they suffer job-related injuries. Workers' comp can also cover legal fees should your injured employee decides to file a lawsuit, though it typically protects your business from being sued.
Why do I need it?
First things first, you need it because it's required by law for most businesses. With the fluctuating economy, many businesses search for areas to trim their budgets, but forgoing workers' compensation insurance could mean fines or jail time. Specific requirements vary from state to state so familiarize yourself with the laws in your state.
Passing on workers' comp also can make you personally liable for the cost of your employees' medical care in the event of a work-related injury or illness. You may even be held personally liable for their wages while they are out.
How much does it cost?
The cost of workers' comp insurance depends largely on the amount of risk involved with your business. For instance, jobs in construction or trucking would have a greater risk of injury than desk jobs. High risk jobs typically come with higher premiums. Your workers' comp track record, if you have one, also will be taken into account when setting your rates.
Another thing to remember: Policy requirements -- and premiums -- vary widely by state, so check with your carrier for specific information based on your location.
How can I lower my workers' comp premiums?
This question can be answered with one word -- safety. Having a safety policy in place can lower your chances of having an employee injured on the job. For example, it may be smart to have written procedures on how certain jobs are to be performed. If your company uses dangerous equipment, make sure your employees are properly trained on its use. The fewer incidents your company has, the lower your workers' comp premiums will be.
Comparison shopping is another way to secure lower premiums from the start. Just like shopping for home or auto insurance, some carriers may offer lower rates and better coverage. Compare your options and find the plan that best fits your business.
Your business, even if it is small right now, is important to you, which is why you go to great lengths to protect it and its employees. Going without workers' compensation insurance leaves your business vulnerable to many threats. Do yourself, your employees and your company a favor and get coverage.
Carrie Van Brunt-Wiley is the editor of HomeownersInsurance.com.