8 Workers' Comp Myths and Realities
Some myths are fun—think Sasquatch and the Loch Ness Monster. Other myths, like the ones surrounding workers’ comp insurance, are less so. These myths can impact your agency’s business. Let’s dispel some of the most common myths about workers’ comp insurance.
MYTH: Because workers’ comp insurance is expensive, some business owners can pay out of pocket if an employee gets injured.
REALITY: In many states, workers’ comp insurance is required for companies with more than one employee. Check the workers’ comp laws in your state to see if it’s unavoidable for your client. If it’s required and a client forgoes coverage, they may be strapped with significant fines or even be forced to close. Show your client the cost of a workers’ comp policy compared with the cost of an average workers’ comp lawsuit (estimated at $40,000) and potential state-imposed fines. A proper, proactive policy will cover everything from lost wages to medical care for an injured employee—a win/win for everyone.
MYTH: Employers don’t need workers’ comp coverage for part-time employees.
REALITY: No matter how many hours they work, all employees need to be covered in most states. Companies that are required to carry workers’ comp insurance but choose not to have it run the risk of incurring heavy penalties and fines. The good news is that having mostly part-time workers will likely result in a lower premium for your client, since the level of risk may be lower, depending on the industry.
MYTH: Employees don’t get injured in workplaces with good safety records.
REALITY: Accidents can and do happen, even in the safest work environments. It’s always better for small business owners to be prepared for any accident, even if the company has a long history of providing a safe work environment and mitigating risk.
MYTH: Remote employees don’t need to be covered since they work from home.
REALITY: An employee’s injury or illness is generally compensable under workers’ comp if it “arises out of and in the course of employment,” regardless of where the injury occurs. Employees who work off-site are entitled to workers’ comp benefits, although they’ll need to prove that the injury is work-related. This may be difficult since telecommuters are often home alone while they work. Additionally, employers are responsible for providing a safe work environment for remote employees just as they do for workers onsite.
MYTH: My client’s business is seasonal, so they don’t need small business insurance like workers’ comp.
REALITY: Whether they operate 12 months a year or only three, businesses with employees need workers’ comp insurance during the months they are open. Most carriers will write seasonal business as long as there’s a defined open and closed period. For example, if your client operates a snow-removal business, the carrier can start coverage in, say, November and turn it off in March.
MYTH: Employees who file a workers’ comp claim will be fired.
REALITY: Many workers avoid filing workers’ comp claims because they fear that they’ll lose their jobs. But workers’ comp laws are designed to protect employees—and business owners—by ensuring workers are compensated for medical expenses and lost wages.
MYTH: Employers who hire only family members don’t need workers’ comp insurance.
REALITY: In most states, a family member who works for a business is still classified as an employee. They would need to be covered, just like any other employee. Without a workers’ comp insurance policy, employers are vulnerable to punitive damages, lawsuits, and high medical bills.
MYTH: Independent contractors don’t require workers’ comp coverage.
REALITY: This popular misconception has caused major headaches for small businesses. If a client hires independent contractors (ICs), even a minor injury may be eligible for compensation. Unfortunately, workers’ comp laws aren’t always clear about which ICs qualify for compensation. Nevertheless, workers’ comp insurance is a simple way clients can protect their businesses, even those with relatively no payroll. Further, contractors and subcontractors should carry their own workers’ comp insurance and carry a certificate of insurance before starting any job.
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