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What every business owner should know about Workers' Comp vs. health insurance

What every business owner should know about Workers' Comp vs. health insurance

Matt Crawford
By Matt Crawford
Dec 3, 2021
5 min read

Hiring employees is an important step toward growing a business and taking it to the next level. The right insurance policy can provide a safety net that lets you focus on training your new employees. But a question that comes up frequently is if owners should get workers’ compensation vs. health insurance.

Workers' comp and health insurance are often confused by first-time business owners and, while they have many similarities, there are key differences that are important to understand. As a business owner, it’s important to understand some of the details that will help you focus on growing your business.

To best protect your businesses and your employees, you’ll most likely need a combination of both. 

Workers' Compensation vs. health insurance

Workers' compensation insurance protects you and your employees from paying significant out-of-pocket expenses after a work-related accident or illness. For example, if an employee experiences an injury after slipping on some stairs, workers’ comp could help pay for a medical exam and treatment.

Unlike health insurance, most states require business owners to provide workers’ comp as soon as they hire their first employee. In some states, this even includes part-time workers and contractors. 

Workers' comp can help cover medical expenses, loss of income and retraining for an injured employee after a workplace accident. 

It also provides benefits to employees permanently injured on the job and survivor benefits to an employee's family members in the unfortunate event that they pass away while working.

Health insurance helps cover personal illnesses or injuries that occur outside of work

For example, if you get sick with pneumonia, your personal health insurance will help cover costs of doctor's appointments, medicine or even a hospital stay. Unlike workers’ comp, health insurance won’t cover lost wages — it only helps pay for medical exams, treatment and rehabilitation. 

You might be wondering: Can I use my own insurance instead of workers' comp? As a sole proprietor, it can be hard to justify paying for both workers' compensation and health insurance premiums if you don’t have any employees. 

However, as a small business owner, the most important thing for you to consider when it comes to understanding workers' compensation versus health insurance is that workers' comp is for work-related illnesses and injuries only. It doesn't serve as a replacement for traditional health insurance for you or your employees.

Personal health insurance helps cover expenses if someone gets sick or injured, but it won’t always cover a workplace injury. It also doesn’t provide coverage for replacing a portion of lost wages or death benefits. 

What is the cost of Workers' Comp vs. health insurance?

It's important to know that employers must pay the entire cost of workers’ comp coverage. 

In most states, business owners have the option to share the cost of healthcare insurance with employees, paying for all expenses or not offering coverage at all. 

With individual health insurance, employees and business owners typically share a monthly premium. That coverage can help with preventative care, plus the costs of needed medical procedures, such as surgeries. 

Workers' compensation insurance is regulated on the state level, so exact costs depend on where your business and employees are located. Other factors that influences costs include:

  • Number of employees 
  • Type of work the employees perform
  • Payroll
  • Industry 
  • Claims history

Generally, businesses in higher-risk industries pay more in workers' compensation premiums. 

Who pays for health insurance while someone is on Workers' Comp?

Who pays for my health insurance while on workers' comp? The answer can depend on the regulations within each state and how long your employee will be out of work.

If your employee is going to be out for fewer than three months and meets the qualifications in the Family and Medical Leave Act (FMLA), their health insurance remains protected while they are out. For those out longer than that, COBRA Continuation is another option. However, it requires employees to maintain that coverage.

It's best to look to your state regulations for guidance on how this could apply to you or your employees.

How NEXT Insurance helps protect small business owners with Workers' Comp

Regardless of how careful and safe you are at work, there's always the potential for accidents to happen.

NEXT Insurance can help you determine the different types of business insurance you might need to help you reduce your risk and help cover any potential costs, up to your policy limits.

WIth NEXT Insurance, you can get the workers' comp coverage you need, customized to your business, within minutes. Once you purchase your coverage, you'll have instant access to your certificate of insurance.

Our licensed U.S.-based insurance advisors are standing by to help if you have any questions.

Start a free instant quote today to explore options for your business.

Matt Crawford
By Matt Crawford
Matt Crawford is Associate Content Director at Next Insurance and a small business insurance specialist.

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