Hiring employees is an important step toward growing your business and taking it to the next level. As important and exciting as it is, it can also be intimidating for a lot of business owners. You’ll be able to share some work but will be taking on a lot of responsibility. But, as in other parts of your business, the right insurance policy can provide a safety net that will let you focus on training your new employee, dividing up the work, and helping your business thrive.
So What Insurance Do I Need?
Depending on your particular field and type of business, there are a variety of new types of insurance
you may want to consider once you become an employer. The one you’re most likely to need, however, is workers’ compensation insurance
. Not only is a good idea, it’s almost definitely required by law. You may also have heard of employers’ liability insurance
. A common question is whether employers liability is the same as workers compensation? The difference between workers comp and employers liability is that one includes the other. Employers liability is one section of workers compensation.
So now you’ll need to know: how does workers’ comp work for employers?
Workers Compensation Insurance
The main section of your workers’ compensation policy covers whatever is required by law for your industry in your area. If you’re not in a state that has a state-managed workers’ compensation fund, you’ll have to buy a commercial insurance policy. In some states, this policy will have to cover certain injury costs, while in others it is based on each employee’s salary. Who exactly is required to provide workers comp also varies by state
. A common question is “do employees pay for workers’ compensation?” The simple answer is no – it’s the employer’s responsibility and illegal to charge an employee for it. The more complicated answer is that as an employer, you’ll have to take this into account when you budget for a new employee and may have to lower the salary you offer accordingly.
Employers’ Liability Insurance
The difference between workers’ compensation and employers’ liability insurance is that employers liability covers more. Workers compensation and employers’ liability insurance both cover injury in the workplace, but to get workers’ compensation paid out you don’t have to prove negligence. In practice, that means that workers’ comp covers accidents that can’t be prevented while employers’ liability covers a wider range of claims against the employer.
Examples of Employers’ Liability vs. Workers’ Compensation
Let’s say an employee falls off a ladder at work and breaks a leg. Workers comp will cover their medical bills and maybe even loss of income while they recover. In this scenario, there are still a lot of ways that employers’ liability can come into play:
- Before the fall, the employee had warned the employer that the ladder was in bad condition, but the employer hadn’t gotten around to replacing it with a safer one.
- The ladder company pays the medical bills then sues the employer who owned the ladder because the ladder was too old and shouldn’t have been in use anymore.
- The injured employee’s spouse is taking care of them and runs over their own foot with the wheelchair that the injured employee is using. Now the spouse has their own medical bills.
- The employer is a ladder manufacturer. The employee is suing as both an employee who was on the job and as a user of the product.
Do I Need Both?
Employers’ liability insurance vs. workers’ compensation may not be a choice you get to make. If your state requires you to buy a commercial policy for your employees, it probably includes both workers compensation and employers liability insurance.
What About My Regular Business Insurance?
For most businesses, the most basic type of insurance is general liability insurance
. It covers injury and property damage that you or your workers caused during the course of a job but doesn’t cover injury to your workers themselves. That’s why as soon as you have a single employee, you’ll have to start thinking differently and preparing to take care of your workers.
When you’re figuring out how to be a great boss and take care of your employees, you’ll have to do some research. The particular business insurance
policy you’ll need will depend on your industry, the structure of your company, and your location. No two businesses are alike, so try to find a policy that meets your individual needs.