Depending on the size, scope and location of your small business, you may be required to carry workers compensation insurance. If that is the case, do you know the ins and outs of this coverage?
For small businesses in the state of California, workers comp coverage in recent years has been nothing short of a headache. High rates have sent a number of smaller companies fleeing the state to places like Nevada and Arizona where they could better afford to provide the necessary coverage for their workforce.
In other states, the rates have been affordable, but people trying to cheat the system have led to issues.
In its most basic terms, workers comp insurance is in place to cover an employer should a worker be injured on the job. For the employee, it is peace of mind knowing that if they are injured while on the clock, they have coverage to pay for what can be high doctor bills.
For the employee to have access to workers comp coverage, they will need to prove that their employer was responsible for their injury or illness.
In the event an employee does suffer an injury or major illness due to work and are turned down for coverage or medical care, they should discuss the matter with a workers comp attorney to see what they are eligible for.
For any small business owner who is not up to speed on workers comp insurance, they are required to supply the funds for workers comp benefits through a policy, with the expense of the coverage not being taken out of an employee's paycheck.
Most employees nationwide are covered through workers comp insurance, with some exceptions in some states being those in agricultural, domestic or independent work situations.
So, do you as a small business owner fully comprehend the need and the facts behind workers comp insurance?
If not, keep these factors in mind:
1. How workers comp is determined -- The premiums get decided through an equation centered on the amount of payroll per job function within the company's business. In most states, the agency in charge of workers comp payroll and guidelines sets the rates, while there are some statutory states whereby only state-run funds are allowed to write coverage. The most important factor here is to make sure your payroll figures are as up to speed as possible;
2. Rates can vary -- Given the fact that insurance carriers utilize various underwriting companies, what businesses are charged for coverage can and oftentimes do differ. The key here is to locate a carrier seeking to write coverage in your industry, therefore allowing you to find the best rates;
3. The better the employee the less paid for coverage -- It is a no-brainer, but emphasize to your employees that the better shape and condition they are in, the less chance for injuries on the job. Remind your employees that it behooves them to be in good shape, thereby lessening the chances they will be out with a serious work injury or illness. Also make sure that you reinforce training for your employees therefore decreasing the chances of any of them getting injured;
4. Be on the lookout for fraud -- While it is not the norm, there are oftentimes cases of workers comp fraud, so employers need to keep their eyes open for such actions. Especially given the tough economic times that many employees find themselves in these days, some turn to unlawfully collecting comp benefits. An example would see an employee who was injured at work and takes time off while collecting benefits, then is spotted during an investigation exercising or doing something else they supposedly would not be able to do due to their injury.
While workers comp insurance will cost you differently from the next guy depending on the state your business is in and its size, not having it can be much more costly.
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