Business Owner's Guide to Buying Workers' Compensation Insurance

Knowing how to buy workers' compensation insurance to protect your employees in case of a work-related injury or illness should be a top priority for business owners. Not only is it the right thing to do, but it's a legal requirement for companies with employees in most states. If you're unsure how to get workers' comp insurance, this guide will walk you through the key aspects you need to know and help you buy workers' comp online.

Understanding Workers' Compensation Insurance

Workers' compensation insurance is a type of business insurance that provides crucial coverage for employees who experience work-related injuries or illnesses. When you get workers' compensation insurance, it typically covers medical expenses, lost wages, and rehabilitation costs if an employee gets hurt on the job. It also helps protect employers by safeguarding against devastating financial consequences from employee lawsuits over workplace injuries.

Workers' Compensation vs. Other Types of Business Insurance

While workers' compensation insurance covers work-related injuries and illnesses for employees, other important types of business insurance protect your company in different ways. Two common policies often confused with workers' comp are general liability insurance and group health insurance.

Here's a breakdown of the key differences between the three policy types:

• Workers' compensation insurance covers medical expenses, lost wages, and rehabilitation costs if an employee is injured or becomes ill at work. It's designed to protect employers and employees from the financial consequences of workplace injuries.
• General liability insurance covers bodily injury, property damage, and personal or advertising injury (slander, stolen ideas) claims from third parties (non-employees). It helps pay for legal defense costs, settlements, and judgments if your business is sued. Coverage might be necessary for leases, contracts, and some professional licenses.
• Group health insurance provides medical coverage for employees with illnesses and injuries that aren't work-related. It helps cover the cost of medical care, such as doctor visits, hospital stays, and prescription drugs, but it doesn't protect the business from liability claims.

Legal Requirements for Workers' Compensation Insurance

Most businesses in the United States must have workers' comp insurance, but the specifics can vary. For instance, it's mandatory in every state except South Dakota; however, some states, such as Alabama and Florida, do not require coverage until a specified employee threshold is met in certain industries. Before buying workers' compensation insurance, you must understand your state's laws to make sure you get the proper coverage.

Requirements for Your Business

Each state has laws that outline the requirements for whether your business needs workers' comp insurance. It can depend on several factors, such as the number of employees, business type, and location. In some areas, companies must buy workers' comp insurance when they hire their first employee. But other states don't require it until you have two, three, or five employees.

How To Buy Workers' Compensation Insurance

If you're wondering, "Where can I get workers' compensation insurance?" you have a few choices: a private insurance company, state insurance fund, or a monopolistic state fund. Businesses in North Dakota, Ohio, Washington, Wyoming, Puerto Rico, and the Virgin Islands rely on a monopolistic state fund for coverage.

You can buy workers' compensation insurance online, over the phone, or through an agent. For many business owners, the most convenient route is to buy workers' comp online. Paychex can connect you with a licensed agent who helps you quickly compare quotes from top insurers, purchase coverage, and manage your policy digitally.

Step 1: Determine Your State's Requirements

Workers' comp laws vary significantly from state to state, including who must be covered, where you can get coverage, and the penalties for non-compliance. To determine your obligation to buy workers' compensation, consult with your state's workers' compensation board or Department of Labor. Many state resources for your business explain the requirements for employers in different industries.

Step 2: Access Your Business Needs

After reading up on your state's requirements, the next step is to assess your business's specific insurance needs. Start by evaluating the size of your workforce (both full-time and part-time employees) — it's a primary factor in determining your obligation to purchase workers' compensation insurance.

Next, consider the nature of your employees' work and the risks they face. If your business is in an industry like construction or manufacturing, you'll typically need a higher level of coverage than those in lower-risk fields due to the increased potential for workplace injuries. Finally, assess your payroll size. Insurers usually base workers' comp premiums on total payroll, meaning larger payrolls generally translate to higher premiums.

Step 3: Discover Your Coverage Options

Coverage options can depend on the insurance company you choose. You'll typically have the most choices if you obtain workers' compensation insurance from a private business insurance company. Paychex offers a variety of solutions that are tailored to meet the unique needs of different businesses. It's a top 100 insurance agency with over 20 years of experience. Paychex partners with A-rated national carriers to help you secure the right coverage, whether you're a small business, LLC, or have hundreds of employees.

Step 4: Get a Free Quote

A free quote from Paychex is a quick and easy way to buy workers' comp online. You'll be asked to provide basic information about your business, such as your industry, number of employees, and estimated payroll. Using that information, Paychex generates a customized workers' compensation insurance quote for your business. The entire process takes just a few minutes, and there's no obligation to buy a policy.

Step 5: Consult with a Specialist

As you review your coverage options, you might have questions or need assistance navigating the process. Paychex offers the option to speak to a specialist. They can help you assess your business needs, compare coverage options from top-rated companies, and find the right policy at a competitive price. Knowing you understand your obligations and have the appropriate protection for your employees and business can give you peace of mind.

How Much Does Workers' Compensation Insurance Cost?

The cost of workers' compensation insurance varies based on your unique business situation. The average cost of workers' compensation per employee is $0.45 per employee hour worked, according to a December 2023 report from the Bureau of Labor Statistics. That adds to roughly $930 annually for a full-time employee working 40 hours per week.

Your specific workers' compensation costs depend on several elements:

• Industry and type of work
• Number of employees
• Payroll size
• Location
• Claims history

Ultimately, the best way to determine your cost for workers' compensation insurance is to get a customized quote from an insurance provider.

Tips for Reducing Your Premiums

While workers' compensation is a necessary cost of doing business, you can tap into strategies to help reduce your premiums. Implementing a safety program is one of the most effective ways to minimize workplace accidents and injuries, directly impacting your claims history and premium rates. You can also control costs by making sure your policy accurately reflects your payroll and job classifications and bundling workers' comp with other business insurance.

Next Steps: Safeguard Your Business and Employees

Workers' compensation insurance is not only legally required in most states but also provides critical financial protection for your company and staff in case of a workplace injury or illness. Paychex customers can buy workers' compensation insurance online quickly and easily, ensuring they have the coverage they need to safeguard their business and employees. Don't wait until it's too late — get a workers' comp quote today.