Small businesses don’t have the same HR departments, accounting teams, and management structures as large corporations. This means that small business owners usually have to wear a lot of different hats when it comes to running the operation.
And while small business owners are often known for having a nimble and adaptive style, this also means they can be stretched quite thin at times. So much so that something like workers’ compensation insurance might not seem a priority. After all, it’s just another bill, right? Not exactly.
Workers’ compensation insurance is an important safety net that any small business needs to protect their company from financial liability in the event of an employee injury or illness.
Read on to discover why every small business needs workers’ compensation insurance as part of its risk management plan.
1. Protection Against Financial Losses
When an employee is injured on the job, the costs of medical treatment, lost wages, and any other associated expenses can quickly pile up to tens of thousands of dollars. Small businesses often have very thin budgets and may not have enough cash to cover these costs if they are not properly insured.
If an employee gets hurt and you don’t have workers’ compensation insurance, you could be forced to pay out of pocket for medical expenses and other costs. Worse still, you could be sued by the employee for any missed wages due to their injury.
2. Protecting Employees and Culture
Another reason why workers comp insurance is essential for small businesses is to protect employees.
Companies that are properly insured are more likely to attract quality workers to fill open positions. This is because employees may be more inclined to work at a company that offers better protections and benefits, such as workers’ comp benefits. It could also help you retain valuable employees who other companies may poach.
3. Protection Against Legal Liability
If an injured employee decides to sue the company for any compensation due to their injury, then the business could also be vulnerable to a costly lawsuit. Considering many modern injuries are chronic and may last for years, a workers comp case could easily drag on for years.
This means the company will have to pay legal fees for a long time. This can quickly become a huge financial burden that many small businesses don’t have the cash flow to cover.
4. Makes Your Business More Attractive to Customers
Besides the legal protection that workers comp insurance provides, it also makes your business more attractive to customers.
Customers will be reassured that your business has a safety net in place to protect against potential financial loss and legal liability in the event of an incident. Research shows that 88% of consumers like to see businesses with workers comp insurance.
5. Avoidance of Hefty Fines
Another good reason why every small business needs workers’ compensation insurance is to avoid hefty fines.
Many states have strict penalties for companies that don’t carry workers’ compensation for their employees. Penalties for businesses that don’t carry workers comp insurance vary greatly by state. However, the maximum penalty is often no less than $10,000 per employee annually. This means that if you have ten employees working for you and you don’t have workers comp, you could be paying a minimum of $100,000.
Wrapping It Up
As you can see, there are many reasons every small business needs workers’ compensation insurance. This includes protecting your business from financial loss, and legal liability, protecting your employees and culture, and avoiding hefty fines.
Given the importance of workers comp insurance, every small business should seriously consider purchasing it. And if your business already has workers comp insurance, then it’s important to keep it up to date and review the coverage to ensure it still meets your needs.