Is my small business required to carry workers’ compensation insurance?

If you own a small business with only a few employees, especially if most of the work desk jobs, you probably think there’s little risk that one of them will get hurt on the job. So, no got to carry workers’ compensation insurance, right?

The quick answer: Wrong.

The somewhat longer answer follows, including an explanation of workers’ compensation laws (they vary slightly by state), how the insurance protects you and your employees, what’s covered and what’s not, and the few exemptions allowed by law.

But first, let’s understand the workers’ comp basics.

What is workers’ compensation insurance?

Workers’ compensation is insurance that protects employers from liability when employees are injured on the work. It covers workers’ lost wages, medical bills, and other expenses and reduces the company’s risk of being sued for workplace injuries or illnesses.

Employers obligated by law to provide workers’ comp insurance must buy insurance from a state-approved insurance company or become a state-certified self-insurer.

Does every business need to carry workers’ compensation insurance?

Most employers are required to hold workers’ comp, no matter the industry or the dimensions of the business. Small business owners might imagine they don’t need workers’ compensation, especially if it’s in an industry with a coffee risk of injury. But in most instances, it's required by law.

Workers’ compensation laws are regulated at the state level. Note that if your business has employees who add quite one state, you’ll get to buy coverage in each state.

Here’s an overview of requirements in Illinois, Missouri, and Iowa:

Illinois workers’ compensation laws

Illinois requires nearly every employer to hold workers’ compensation insurance, even those with only one part-time employee. According to the Illinois Workers’ Compensation Commission, that means an estimated 91 percent of employees are covered under the state’s workers’ compensation laws.

The only instances when workers’ comp isn't required:

• Sole proprietors, business partners, and members of limited liability companies.
•  Family members who are corporate officers of the business.
• Family members who work for an agricultural business that employs less than 400 working days of labor per quarter during the preceding calendar year, or who are immediate family members and live with the employer.

The fine for knowingly and willfully failing to carry workers’ compensation insurance in Illinois is up to $500 for every day of noncompliance, with a minimum fine of $10,000.

Go to the Illinois Workers’ Compensation Commission website to read the complete Illinois Workers’ Compensation Act.

Missouri workers’ compensation laws

According to the Missouri Department of Labor & Industrial Relations, employers with 5 or more part-time or full-time employees – and all construction employers – are required to obtain and post notice of workers’ compensation insurance, with limited exceptions.

Exceptions in Missouri are:

• Farm laborers, domestic servants, certain real estate agents, and direct sellers, and commercial motor-carrier owner-operators.
• Sole proprietors and business partners, although they can choose to be covered.
• Close family members who are employees and limited liability company members can opt-out of coverage.

Employers who aren’t legally required to carry workers’ compensation insurance must keep in mind that they are exposing themselves to civil lawsuits if their employees are hurt on the job.

A Missouri employer who fails to provide workers’ comp based on the law’s requirements can face a class A misdemeanor punishable by a fine of up to three times the annual premium the employer would have paid had it been insured, or up to $50,000, whichever is bigger. In addition, an employer who fails to post the notice of workers’ compensation at the workplace risks a fine of $50 to $1,000 and imprisonment.

More information about Missouri’s workers’ compensation laws is often found here.

Iowa workers’ compensation laws

Like Illinois, nearly all Iowa employers with at least one employee must carry workers’ compensation insurance. Among the exceptions are:

Sole proprietors, business partners, and members of an indebtedness company.

• Domestic/casual workers who make under $1,500 annually.
• Agricultural workers whose employer has a cash payroll of less than $2,500 annually, agricultural exchange labor, and officers of a family farm corporation, as well as their spouse, parents, siblings, children, stepchildren, and spouses of these relations.

A full list of the Iowa exemptions can be read here.

Criminal and civil penalties can be imposed on employers who do not comply with Iowa’s mandatory insurance law.

What’s covered by workers’ compensation insurance?

While states vary slightly, standard workers’ compensation policies cover medical benefits, missed wages, and permanent partial disability. When an employee makes a claim, he or she must prove that their injury, whether sudden or chronic, occurred on the work. There’s also a statute of limitations for filing a claim.

For more details, check out our blog post on the topic.

What isn’t covered by workers’ compensation insurance?

A recent Business News Daily article says that workers’ compensation insurance doesn’t cover all lawsuits overwork injuries and that additional coverage, such as employer’s liability insurance, may be needed to help buy legal fees, court costs, and settlements.

Consult an expert about workers’ compensation

Because of the nuances and complex nature of workers’ compensation insurance, it’s important to consult an insurer who can determine how best to protect your company from lawsuits. Even the exemptions within the state laws are often confusing, so it’s best to ask an expert.

WintersLLP agents have expertise in business insurance and may walk you thru every thing you would like to understand.

Workers’ compensation tips for employers

In addition to complying with state laws regarding workers’ compensation coverage, here are some tips for preventing workplace injuries and handling situations when workers get hurt.

Implement, maintain, and enforce a workplace safety program to reduce injuries.

• Provide prompt medical care for an injured worker.
• Keep records of the medical care, who authorized care, dates of appointments, mileage, meals, and lodging expenses incurred during medical treatment.
• Notify your insurance carrier immediately when a workplace injury occurs and promptly file the necessary paperwork with the state.

Contact worker compensation audit lawyer.