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Workers’ Compensation laws every business owner should know

Kim Mercado image
By Kim Mercado
Nov 4, 2021 min read

Having workers’ compensation insurance provides peace of mind for you and your employees. You can rest easy knowing you’re meeting state requirements and employees know they’re protected if they get sick or hurt on the job.

As a responsible employer, you know how important it is to have workers’ compensation insurance for your employees. Beyond making good business sense and being the right thing to do, it’s usually a legal requirement. 

But what are the workers’ compensation laws and how do they relate to you? Let's explore.

What is Workers’ Compensation?

Workers’ compensation insurance provides employees with medical benefits and wage replacement if they are injured or contract an illness on the job. As a small business owner, you will typically purchase a policy to cover your employees. 

However, what may be a surprise is that self-employed people can also get workers' comp to cover themselves.

What are Workers' Compensation laws?

Basically, workers’ compensation laws (also known as workmans comp laws) are created at the state level to dictate the coverage employers need to provide their employees. 

Each state has unique laws. They include details on: 

  • When workers’ comp is required
  • Who can make a claim
  • How they must make that claim, for what and when.

There are two main reasons workers' compensation insurance laws exist: to protect employees and protect business owners.

To protect employees

There is an obvious level of protection that workers' comp laws provide. That is, the payments and coverage of medical expenses and salary if a person gets injured or sick due to their job. 

This money is often essential in helping the person recover and keeping their family afloat. 

Workers’ comp laws also save claimants time and energy. Instead of suing and enduring a trial, they are more quickly reimbursed by their policy and don’t risk a court loss in which they may receive nothing.

To protect employers 

Workers’ comp also protects you, as a business owner. 

Premiums are a small price to pay when the alternative is considered — lawsuits and out-of-pocket expenses. 

If a worker broke his leg on the job, think of the damages that would have to be paid out of pocket for the ambulance, hospital fees and rehab. Without insurance, an employee accident could put you completely out of business.

In addition to covering all sorts of expenses, carrying workers’ comp also helps you position yourself as a professional in your field. For example, if you’re in the construction business, workers’ compensation for contractors is often a requirement for bidding on contracts. 

If you don't have it, your company won’t even be considered for the job.

Is there a difference in Workers' Compensation laws depending on the state?

The law for workers’ compensation depends on where you live. 

That's because each state has its own laws for workers’ comp and system for handling claims. 

Although the state runs the system and purchasing workers' comp is often mandatory, it must be purchased voluntarily. That means you need to proactively go out and buy it. 

Who can make a claim and when?

There are a few initial requirements needed to make a workers' comp claim. The first, of course, is that the claimant is an employee. The second is that their employer — you, the business owner — has workers’ comp coverage and that the injury occurs in the course and scope of the employment. That is, the employee was working for the employer at the time of the accident.

In addition, there are time restraints in terms of making a claim. The claim must be made according to the state’s deadline for reporting.

The other big factor is the reason for making a claim. Just because a worker is sick or injured doesn’t automatically make them eligible. Rather, their sickness or injury must be work-related. That is, caused as a direct result from the work that they do.

What is considered a valid claim?

There are many examples of on-the-job illnesses or injuries that could be a valid reason for a workers’ comp claim

The main factor in determining eligibility is if it was directly caused by a workplace injury or illness. This can include an employee:

  • Breaking an arm after falling from a ladder
  • Getting sick from chemicals being used at work 
  • Experiencing hearing loss from a loud work environment 
  • Getting carpal tunnel syndrome from repetitive motion 

The list is long and quite inclusive. 

Claims can include reimbursement for:

  • Medical expenses
  • Loss of income
  • Retraining
  • Permanent injury
  • Survivor benefits

Why a Workers’ Compensation claim might be denied

There are several reasons why a workers’ comp claim may not be accepted. For example, if the employee was doing something in violation of the policy. This is particularly relevant in more dangerous lines of work where activities that are and aren’t covered by the policy are explicitly detailed.

If your employee was drunk or under the influence of drugs, the claim could be disputed. 

If the injury or illness wasn’t related to work, that also wouldn’t be a legitimate workers’ comp claim.

How NEXT helps you get covered

Regardless of how careful and safe you and your employees are at work, there's always the potential for accidents to happen. We’re 100% dedicated to helping small business owners find the right business insurance at affordable prices. 

Since we only help small business owners and self-employed professionals, we can create a customized insurance package that is often cheaper than other options.

With our streamlined application, you can get a quote, see coverage options and purchase coverage — in under 10 minutes. When your purchase is complete, you can access your certificate of insurance online any time, 24/7.

If you have questions, our licensed, U.S.-based insurance professionals are available to help.

Get started with your free quote today.



Kim Mercado image
By Kim Mercado
Kim Mercado is the managing editor of NEXT's small business blog.
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