Does Your Small Business Need Workers Compensation Insurance?

Does Your Small Business Need Workers Compensation Insurance?

You might assume that workmans comp insurance is only required for large companies with factories and warehouses. However, if you run a small business and hire employees, you may be required to purchase insurance.

Requirements Vary by State

All states require some form of workers compensation insurance, but each state has its own specific provisions. For example, sole proprietor ships typically do not need insurance unless they hire employees. However, there are exemptions for certain types of employees such as:

  • Employees who work solely on commission
  • Employees who are immediate family members and spouses
  • Independent contractors and subcontractors

Some states do not require insurance when the number of employees is less than three or four. Also, partnerships where all working parties are considered owners usually do not need insurance. Some states do require coverage for independent contractors, or they require independent contractors to obtain their own.

How to Reduce the Cost of Insurance

The best way to reduce workmans comp insurance costs is to maintain a low-risk work environment. Address issues before they become serious problems and train employees on all inherent risks. Apply for insurance credits when you have a clean safety record and discuss plan options with your provider.

Check your state’s requirements for workmans comp insurance. If you need to purchase insurance, call a state-approved provider to find a plan that works best for your small business.