Workers’ Comp: Why You Should Carry It No Matter What

The law requires many business owners to carry workers’ compensation insurance so that their employees can file a claim if they sustain an injury on the job. This system protects employers from lawsuits and reduces strain on the courts by avoiding excessive lawsuits. According to the data, 4.9 million employees file workers’ comp claims every year. Therefore, it’s easy to see why this system remains in place.

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Each state has its own requirements. But generally, the requirement kicks in when you have between one and three employees, with exceptions that vary by state.

Although many business owners carry a policy, if you believe that you don’t need to carry workers’ compensation insurance for your business because the law does not require you to, there are several reasons to reconsider.

The Law Might Actually Require You to Carry Workers’ Comp

Before deciding not to carry a workers’ comp policy, make sure to get advice from an experienced attorney. Then you will know for sure whether or not the law requires you to have coverage. Not having a policy when required can result in devastating consequences. Workers’ compensation lawsuits are often time-consuming and expensive. Moreover, if violate the law, you may have to pay out a significant judgment on top of potential fines.

Don’t rely on your own research or articles you’ve read online to decide whether or not you need to have a policy. Searching for legal advice online is a bad idea. What’s more, you should avoid paying for services that offer one-time consultations on sites like Fiverr. The only reliable answer will come directly from a workers’ comp attorney.

A Lawsuit Could Ruin Your Business

Maybe you’ve discussed your situation with an attorney who has to told you that you don’t need to carry workers’ comp. That may seem like a relief, especially since you’ll be able to save money every month. However, consider that workers’ compensation insurance provides protection against lawsuits that can end up costing you more than your premiums.

For example, say you only have three employees and the law says you don’t need to carry insurance. Then one day, one of your employees becomes injured on the job. If you had workers’ comp, they would have to file a claim through your insurance provider. Then your policy would pay for their medical bills. But if this happens and you don’t have workers’ comp, your employee will probably sue you.

The difference between a workers’ comp payout and a lawsuit is huge. While having claims on your policy can increase your coverage costs, it’s nothing compared to the cost of a lawsuit. Workers’ comp will only cover medical bills. And since it’s an insurance company, they’re not exactly going to be too generous with your employee.

On the other hand, if your employee hires a lawyer and sues you, there’s a good chance they’ll get a judgment totaling far more than what workers’ comp insurance would have paid. Plus, they’ll be able to claim additional compensation, like lost wages. By the time you’re done with a lawsuit, the judgment against you is likely to far exceed the cost of your monthly premiums.

Your Contractors Might Really Be Employees

One situation you may not have considered is that your independent contractors could actually be employees. If you’ve misclassified your contractors, and one of them gets hurt and decides to sue you, you will be on the hook for their injuries. What’s more, if this happens, you’ll probably be fined for not carrying workers’ compensation insurance. Plus, you’ll be required to buy a policy. It’s just not worth the risk.

There Are Some Exceptions

Now that you know some of the reasons to carry workers’ compensation insurance even when you don’t legally have to have a policy, it’s important to address some exceptions. For instance, if you choose not to carry a policy, but you’re ready and willing to cover medical expenses for an injured employee, you may be able to avoid a lawsuit. However, there’s no guarantee.

Make an Informed Decision About Workers’ Comp

Workers’ compensation was designed to help employers avoid costly lawsuits, but you might prefer not to buy coverage. As long as you are aware of the potential consequences, the right choice boils down to whether or not you’re willing to take the risk when you don’t legally have to carry a policy.