What to Know About Workers’ Compensation Insurance for Small Business Owners

Workers’ compensation insurance can help cover employee costs for injuries that occur while on the job—and also helps protect the employer from being sued by the employee if they receive compensation from this type of coverage.

The workers’ compensation requirements your small business must meet will depend highly on the state in which your business is located. Not only do the requirements tend to vary by state, but they can also differ based on the industry you’re in or the size and structure of your business.

For example, Alabama businesses with five or more employees are required to carry workers’ compensation coverage—and in many cases, officers or members are also counted as employees.

Alaska, on the other hand, requires that most businesses with one or more employees have workers’ compensation insurance—but there are certain exceptions made for sole proprietors, partners, members of non-managed LLCs, part-time babysitters, and other types of businesses.

Workers’ compensation coverage is required by most states, and each state generally handles the workers’ compensation system differently. That includes where you can buy your coverage.

Employees with a higher risk of injury are more expensive to insure

Each group of employees is given a class code, and that code is then used by insurance companies to estimate the risk level of the work the employees are performing.

Independent contractors may not count

In many cases, state law doesn’t necessarily require independent contractors to be covered under your workers’ comp insurance policies, as they’re technically someone else’s employees.

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