When Do I Need Workers’ Comp Insurance?

Savvy small business owners understand the importance of protecting one of their most valuable assets—their employees. A key part of that is providing a safe working environment. But even though you take all reasonable precautions, you may be liable when an employee suffers a job-related injury or illness. That’s what Workers’ Compensation Insurance (or Workers’ Comp) can address. Learn more about Workers’ Comp with these FAQs.

This is not legal advice. You will want to speak with your insurance professional or legal consultant to answer specific questions about your business.

What is Workers’ Compensation?

Workers’ Compensation Insurance is a mandated coverage that employers must provide. It can pay for medical and disability expenses caused by work-related injuries and illnesses. That can include employee medical bills, a portion of lost wages, vocational rehabilitation, and death benefits if the employee dies. In exchange for coverage under the employer’s policy, employees waive their right to sue the employer (in most cases). Click here for more information.

When do I need Workers’ Comp insurance?

Each state has its own requirements for Workers’ Comp. Generally, if you have employees who aren’t owners of the company, you probably need Workers’ Compensation Insurance.

What are the requirements for my state?

This chart from NFIB provides a state-by-state comparison of requirements. It also provides a link to the office that is responsible for the program in your state.

Who is covered by Workers’ Compensation insurance? 

Not all employees are required to have coverage. It varies based on factors like number of employees, type of business, work performed, and type of worker. Learn more about eligibility requirements. Remember, requirements vary by state.

Do I need Workers’ Compensation if I don’t have employees?

Generally speaking, sole proprietors and partnerships are not required to purchase this coverage unless they have employees. Most states allow these individuals to buy coverage on themselves, but it’s not required.

Do I need to provide Workers’ Compensation insurance to contractors? 

Many states exempt independent contractors from the Workers’ Comp requirement. See this list from the Equal Opportunities Commission to help determine independent contractor status. But even verifiable contractors may sue for injuries incurred while performing work for your business. That’s why it’s important to require contractors to provide you with proof of their own insurance or have a waiver on file. Talk to your insurance professional for guidance.

It’s important to understand your obligations to provide Workers’ Comp coverage. Since requirements may vary by state, you will want to check with your insurance professional or legal consultant for assistance.

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