If you run a small business and you have employees, you need to carry worker's compensation insurance. When it comes to shopping for a policy, you want to make sure you get the best coverage that meets your needs and local requirements. Here are some tips for addressing this need.
#1: Understand Your State's Insurance Requirements
Before you start shopping insurance agencies for the best policy, you need to make sure you understand your state's requirements and regulations regarding workers' compensation coverage. In some states, you need a workers' compensation policy as soon as you have one employee other than yourself, and in other states, you don't need the coverage until you have a certain number of employees. You may also be required to carry a policy that provides coverage to a specific dollar amount.
#2: Coverage is Location Bound
Second, it is important to understand that workers' compensation policies only provide coverage within the limits of the state that the policy is issued or connected to. If your business operates in multiple states, for example, you run an electrician business on the border of two states, and service clients in each state, you are going to need a separate workers' compensation policy that follows the state rules for each state you do business in.
#3: Only Covers Injuries to Employees
Third, it is important to understand that workers' compensation coverage only applies to injuries that occur when an employee is on the job and on the clock. Injuries that occur at your business but when an employee is not working or injuries that occur to non-employees at your business, are not covered under your worker's compensation coverage. For those types of situations, you need a general liability policy. Make sure you have all the liability coverage your business needs to operate safely and protect itself.
#4: Employee Classification Matters
When purchasing workers' compensation insurance, you can't just tell the insurance company that you have four employees and get coverage for that. Instead, you are going to need to provide salary information and a work description for each employee. The salary information is important because workers' compensation coverage is designed to replace an employee's salary, so their salary matters when configuring the level of coverage.
An employee's job title and a description of their role allow the insurance company to determine the risk associated with the job. For example, the risk associate with an administrative assistant is lower than the risk associated with a roadside construction worker for the same company. It is important to keep accurate information on your employee's salaries, job titles, and roles in the company.
Contact insurance policy providers to learn more.