Workers compensation insurance helps pay for employee injuries and illnesses that happen on the job, while helping protect your business from employee-related lawsuits.
Do you have employees? Congrats on growing as a business!
Growth often means change, and even bringing on just one employee can open the door to new requirements for your business. Learning how to navigate those changes can feel tricky, but with the right guidance, you can quickly get the right workers comp coverage that keeps your business safe and compliant.
TL;DR: What Is Workers Compensation?
- Workers compensation insurance is required in most states if you have employees
- It can cover expenses after a work-related injury or illness
- It can protect your business from injury-related lawsuits
Workers Comp Is a Big Deal, Even If You’re Small
Think of workers comp as a fire extinguisher. Most businesses have one, and while it doesn’t stop a fire from happening, it’s there in case things unexpectedly go ablaze.
Having workers compensation does four things for your business:
- Meet state compliance: Most states require any business with one employee (not including yourself) to carry workers comp, and skipping it can lead to fines or penalties
- Protect your finances: Cover expenses related to a workplace incident, like medical bills and lost wages
- Limit legal exposure: Workers comp reduces the risk of employee injury lawsuits
- Support your team: Your employees get the care they need (when they need it) to recover and return to work
What is Workers Compensation Coverage?
Workers compensation coverage allows your employees to have coverage for work-related illnesses and injuries. It is employer-paid, and can also work as protection for you against employee negligence lawsuits.
One of the biggest benefits is that workers comp is no-fault. Employees can still receive benefits if an incident was an accident or a mistake (lowering the chance of a painful blame game).
What Workers Comp Covers (& What It Doesn’t)
Workers compensation is designed to help when something goes wrong because of work. That said, it doesn’t cover every possible situation.
| What Workers Comp Covers ✅ | What Workers Comp Does Not Cover ❌ |
|---|---|
|
Medical care |
Intentional injury |
|
Lost wages |
Intoxication |
|
Rehab or ongoing care |
Off-duty or non-work incidents |
|
Disability benefits |
Unemployment benefits |
|
Death benefits and funeral costs |
Injuries outside the scope of employment |
The most common scenarios that qualify an employee for workers comp include:
- Work-related injuries: Slips, falls, lifting injuries, or accidents while making deliveries
- Repetitive stress injuries: Conditions like carpal tunnel or muscle strain that develop over time
- Work-related illnesses: Exposure to chemicals, allergens, or unsafe working conditions
- Work-related death: Benefits may be paid to an employee’s dependents for a funeral
Workers Compensation vs General Liability
Workers’ comp protects your employees if they’re injured at work. General liability insurance helps protect your business from accidents involving clients, customers, or visitors.
Most people get small business insurance, while workers’ comp is usually required once you have employees.
Coverage can vary by state and policy, so always refer to your specific policy for exact details.
Does My Small Business Need Workers Comp?
In most cases, you need workers comp coverage if you have employees. You’ll commonly see special circumstances around the following:
- Employees vs. independent contractors: True independent contractors are usually not covered under your workers’ comp policy. However, if a contractor doesn’t meet your state’s definition or doesn’t carry their own coverage, you could still be responsible.
- Number of employees: Some states require workers’ comp as soon as you hire your first employee. Others have higher thresholds. Part-time and seasonal employees often count.
- Remote or out-of-state employees: If employees work in another state (even remotely), you may need additional coverage to fulfill additional state requirements. These are things your insurer can handle, so always disclose this information to them.
- Monopolistic states: A few states require workers’ comp to be purchased through a state-run fund instead of a private insurer. The process is different, but coverage is still available.
When in doubt, it’s better to ask than assume. Guessing wrong may cost you more than getting clarification upfront!
Questions? We Have Answers!
Feel confident in your coverage with the help of our licensed agents! Contact our team today to find the right policy for your business.
Does My State Require Workers Compensation?
Employers’ workers compensation rules vary by state, and requirements often depend on how many W-2 employees you have. In many states, coverage is required once you hire your first employee.
Check your state’s specific requirements through the U.S. Department of Labor’s interactive map or by reviewing your state’s workers compensation agency.
How to Buy Workers Comp
You can often apply to buy workers comp online, and work with an agent to customize your coverage to your business’s exact needs. With Insurance Canopy, this process is relatively quick and easy:
- Gather basic info like payroll, job roles, locations, and your FEIN (Federal Employer Identification Number)
- Submit your application (we’ll help align class codes)
- Receive your quote (or connect with an agent if more details are needed)
- Purchase your policy to secure coverage
- Download your Certificate of Insurance (COI)
Once your coverage is paid for, you’re protected, ready to show proof of insurance, and prepared for the unexpected.
Common Terms You’ll See on a Workers Comp Policy
Insurance is already complicated enough; you don’t need to be fluent in it! It does help to familiarize yourself with these terms you may see:
- Employment Practices Liability (EPLI): Defines certain actions or claims not covered by workers comp
- Deductible: What you pay out of pocket before coverage applies
- Waiver of Subrogation: Prevents your insurance from seeking payment from another party after paying for a claim
- Certificate of Insurance: Proof of coverage, often requested by states, local government, landlords, or clients
Common Workers Comp Mistakes to Avoid
Most workers compensation issues come from small errors, not big mistakes. The most common ones we see include:
- Misclassifying employees or contractors
- Under-reporting payroll
- Ignoring near-miss incidents
- Delaying claim reporting after an injury
Staying organized, communicating with your agent, and asking questions early helps prevent headaches later.
Keep Your Crew Covered
Before requesting a quote, it helps to have key pieces of information on hand:
- Annual payroll
- Employee roles and locations
- Business structure
- Owner inclusion or exclusion details
At Insurance Canopy, we make it easy for small businesses to access reliable coverage quickly. Simply apply online, anytime. Our agents review and quote most policies within 1–2 business days, then send a free quote right to your inbox!
Keep your business moving with powerful protection for your team from Insurance Canopy.
FAQs About Small Business Workers Comp
Do I Need Workers Comp With Only One or Part-Time Employee(s)?
Yes, you’ll often need workers comp with only one or part-time employees. Requirements vary by state, so be sure to check your local guidelines.
Do Self-Employed Businesses Need Workers Comp?
No, self-employed businesses may not need workers comp, depending on your state’s laws. Always check your local requirements to know what coverage you need.
Are 1099 or Independent Contractors Covered?
No, 1099 or independent contractors are not typically covered under workers comp.
Your state will have a certain definition of “independent contractor,” and if the contractor does not fit that (or is not carrying their own insurance), you could be liable for work-related accidents. Check with your state and insurer about coverage for a contractor before work begins.
How Are Premiums Calculated?
Premiums are calculated based on various factors, like payroll, job classification, and claims history. Your premium is unique to your business and state requirements.
What Are the First Steps After An Injury?
The first steps after an injury include:
- Promptly get medical care, if necessary
- Document the incident
- Report the claim to your insurance provider
It is vital to start working with your insurer as soon as possible to ensure your employee receives the proper support for their care quickly.
What If I’m In a Monopolistic State?
If you’re in a monopolistic state, you’ll need to purchase coverage through the state fund instead of a private insurer like Insurance Canopy.
Insurance Canopy currently does not provide workers compensation coverage to North Dakota, Ohio, Washington, or Wyoming. These states require you to purchase coverage from a state fund at this time.
