Workers’ compensation insurance is something that nearly every single business needs to have–or ought to have. It is vital to the health of the company because it provides protection for you as the business owner, and it provides benefits for the injured employee. You may think that it costs too much to pay for workers’ compensation insurance but be assured that the cost of the lawsuit if you don’t carry it, will be much worse.
But when does your company need to have workers’ compensation? Who is required to carry workers’ compensation insurance by law?
The answer is that it varies from state to state. Workers' compensation laws are driven by the states, not the federal government, so state guidelines will dictate when you are required to get it.
Workers’ compensation requirements vary by the number of employees. For example, in New Jersey, all employers with any employees at all (full or part-time) must have workers’ compensation coverage. In Massachusetts, even sole proprietors must carry workers’ comp insurance, regardless of the number of hours worked.
On the other hand, Florida has a law that any business that works within the construction industry with one employee is required to carry workers' comp but non-construction businesses are only required once they have four or more employees. And in Missouri, all employers with five or more employees must carry workers’ compensation. For a full list of state requirements, check here.
It is highly recommended that every employer, regardless of the status of employees, get coverage for injury or illness of their workers. Injured workers–from work-related injuries–can cost a company a lot.
Even in some of the states listed above, such as Missouri, if there are injuries occurring at the place of business and there are only four employees of the business, then the employer is still liable and can still be sued. Small businesses like limited liability companies and sole proprietors partners can still be on the line for very high medical costs and even punitive damages if the injured employee is unable to make a workers’ compensation claim.
So while coverage requirements vary from state employer to state employer, all corporate officers should be prepared as insured employers. It would be in their best financial interests to work with an insurance agent or an insurance company–like our team at Kickstand Insurance – to get their workers' compensation insurance set up correctly.