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Your business is growing. So how do you know when it’s time to protect it with workers compensation insurance?
If you employ one or more people (even on a part-time basis), you may need workers compensation coverage. Most states require business owners to carry this policy when you hire your first employee, so it’s worth knowing the specific requirements in the state where you operate.
If an employee gets sick or injured while working for you, workers compensation - also known as employers liability insurance - can provide your business with financial protection.
Workers compensation insurance covers the costs of lost wages, medical bills, rehabilitation expenses, and even death benefits. Carrying workers compensation can provide much-needed security, as having this coverage in place prevents an employee from suing your business for workplace injuries.
Here’s how workers compensation insurance works: If an employee gets injured on the job, this insurance can cover medical costs and lost wages.
More specifically, workers comp can cover:
Workers compensation insurance does not cover:
Whether you hire a full-time employee, a part-time employee, or a subcontractor, you may be legally required to carry workers compensation insurance. Keep in mind that your state may determine how much coverage you’re required to carry.
One important note: Your state may not need you to carry workers comp coverage for your subcontractors if they’re an independent company or entity.
The owner of the business (that’s you!) pays for the policy premiums. If an employee gets injured, hurt, or sick on the job, that’s where your workers compensation insurance can come into play. Your insurance provider may pay out any costs and claims associated with the illness or accident, up to your coverage limit.
The number of employees you have in your company can influence how much you pay for workers compensation insurance. Think about it this way: The more employees you have, the more coverage you’ll need in case something happens to them.
When shopping around for workers compensation insurance, you should expect to be asked for the number of full-time and part-time employees in your business. You may also need to provide the number of subcontractors or consultants you work with. Remember, you may not need to cover subcontractors or consultants who work at their own businesses.
Your workers compensation insurance premiums are considered tax deductible. That’s because the IRS considers your policy premium to be a business expense, which is tax deductible. However, you should ask for advice from a tax preparer or an accountant if you want to learn more about deducting your insurance premiums on your business’s income taxes.
If you’re working with employees (even subcontractors), you may be legally required to have workers compensation coverage. The minimum coverage amount varies on a state-by-state basis, but as soon as you’re ready to start hiring, you should start shopping around for workers comp insurance. Once you buy workers compensation insurance, you should be issued a certificate as proof that your business has coverage.
A certificate of insurance (COI) provides proof that your business is protected in case your employees get injured or sick while on the job. Your workers compensation insurance can help you demonstrate to third-parties that you have your legally required coverage. For example, if a government contract requires you to have workers compensation insurance, showing your certificate could help land you the project.
*Harborway Insurance policies are underwritten by Spinnaker Insurance Company and reinsured by Munich Re, an A+ (Superior) rated insurance carrier by AM Best. Harborway Insurance is a brand name of Harborway Insurance Agency, LLC, a licensed insurance producer in all 50 states and the District of Columbia. California license #6004217.