Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent Daniel Walker

UPDATED: Mar 31, 2022

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Workers compensation is a state-mandated policy that pays benefits to workers who are injured on the job. Usually, this is a no-fault program that covers major expenses like medical care, lost wages, and disability. Why would a company want to cooperate with such a policy? In some cases, it is because the law requires so.

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Even in cases where workers comp is optional, however, employers are more than willing to pay for it so as to avoid a lawsuit. In exchange for receiving benefits, the injured worker agrees not to sue the company for injuries.

Why Workers Compensation Insurance is Important

Workers’ compensation can be administered locally, at the state level, and federally. In order to provide a workers compensation program, the employer must purchase workers’ compensation insurance.

Another option would be to become a state-certified self-insurer; although the first option is more accessible to small and mid-range companies. Besides medical coverage and lost wages, such a policy usually does not offer benefits in the areas of economic loss (past and future), dependants of workers, pain and suffering and punitive damages for negligence.

A company cannot very well pay each worker’s expenses from cash funds. Therefore, an insurance policy is an order.

What often happens in injury situations is that the company hires an insurance provider that fails to handle injured worker claims in a fast or compassionate way.

This is why many employees are forced to leave the company they work for and file a lawsuit. Disgruntled ex-employees never blame the insurance company for failed benefits—they blame you as the employer!

The question is: do you need workers compensation insurance? Not every company is legally required to pay for such a policy.

This differs according to state law; some companies must provide the program if they have five or more employees, whereas some contractors must pay for a policy even if he/she just has one employee. However, it is safe to say that not every employer needs this coverage. It really depends upon local risks and the number of employees working for you.

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Factors to Consider in Shopping for Workers Compensation Insurance

Obviously, the more dangerous the job is, the more seriously you must consider business insurance and liability issues. This is not just a matter of working with dangerous equipment or handling hazardous materials. Workers could theoretically be injured by large falling objects, by slipping on a floor, by getting accidentally shocked or burned, or by falling off ladders.

Ultimately, it doesn’t take much trauma to the head or face to cause a mortal wound. It’s a shrewd idea to sit down and evaluate the likelihood of anyone getting hurt inside your place of business.

Try to think of the worst-case scenario and come up with possible health risks associated with your line of work.

Do not underestimate any type of injury. In today’s litigious culture you have to be careful and think one step ahead of everyone else. Lawyers are aggressively seeking out prospective plaintiffs for personal injury cases because they want to get paid.

Remember, once a case does go to trial a lawyer will try to tack on pain and suffering, punitive damages, lost wages and anything else that springs to mind. This could literally cost you millions of dollars. Traditionally, premiums are calculated based on a standard of $100 of payroll.

Therefore, the cost of business insurance, and a workers compensation insurance policy specifically, for a clerical (low risk) position would cost less than 40 cents per $100 of salary. However, as the risk for injury rises, so do the insurance premiums you pay. The average premium cost for a roofer is over $20 per $100 of payroll.

What to Look for in Workers Compensation Insurance

When choosing an insurance policy, make sure you have a generous plan that promises to pay back a dividend based on your claims history. You should be rewarded financially, in dividends or discounts, if you maintain a safe working environment. Otherwise, you’re losing big money every year on your operation.

In the end, you are not merely buying such a policy to protect your assets. You are also doing so as a personal favor to the employees you work with, provide for, and trust should they be injured on the job. Large and popular organizations make efforts to keep their working staff happy because this results in successful employee retention.

Keeping good people within your ranks will help your business to thrive. On the other hand, disliked corporate conglomerates tend to go with the cheapest policy, usually with unfavorable terms towards the workers. Make sure that the workers compensation program you choose benefits everyone at a reasonable cost!

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