Workers’ Comp 101: What Every Small Business Owner Should Know

What is Workers’ Compensation?

Workers’ compensation (workers’ comp) is a type of insurance that helps employees if they get hurt or sick because of their job. It pays for medical bills, lost wages, and therapy. It also protects businesses by preventing lawsuits from injured workers.

Why is Workers’ Comp Required?

Most states make it a rule for businesses with employees to have workers compensation insurance. For example, in North Carolina, businesses with three or more employees (full-time or part-time) must have it. This insurance helps injured workers and keeps businesses from facing big legal problems. Not following this rule can lead to fines, business shutdowns, or lawsuits.

How Workers’ Comp Protects Employers & Employees

• For Employees: It covers medical bills, replaces lost wages, and helps with disability benefits if needed.
• For Employers: It prevents expensive lawsuits and keeps the workplace running smoothly.

Steps to Getting Workers’ Comp Coverage

1. Check Your State’s Rules: Every state has different requirements.
2. Find a Trusted Insurance Advisor: Work with an insurance agency to help you find the best carrier.
3. Keep Your Workplace Safe: Offer safety training and take steps to prevent injuries.
4. Know the Claims Process: Make sure employees report injuries right away.

Employees can be the #1 asset in businesses.  Having workers compensation insurance is important for keeping both employees and businesses safe. Knowing how it works helps avoid problems and keeps everything running smoothly.

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Common Workers’ Comp Myths Debunked

Myth #1: Only Dangerous Jobs Need Workers’ Comp

Truth: Even jobs that seem safe, like office work, can have risks. Employees can get hurt from falls, lifting things the wrong way, or even typing too much. Every job has some level of risk.

Myth #2: Workers’ Comp is Easy to Fake

Truth: Some people think workers fake injuries to get money, but that’s rare. Insurance companies investigate claims, and if someone lies, they can face serious legal trouble.

Myth #3: Independent Contractors Don’t Need Workers’ Comp

Truth: If a business incorrectly labels an employee as an independent contractor, they can get in trouble. Some states still require workers’ comp, depending on how the job is set up.  Many independent contractors are required to have it based on their contracts.

Myth #4: Small Businesses Don’t Have to Provide Workers’ Comp

Truth: Most states require it, even for businesses with just one or two employees. Not having it can lead to fines, lawsuits, or even shutting down the business. 

Myth #5: Workers’ Comp Only Covers Injuries at the Workplace

Truth: If an employee gets hurt while doing their job—even if they’re driving or working from home—they might still be covered.

Myth #5: All my employees are part time or they are volunteers, I don’t need Workers Comp

Truth: Every employee is eligible for Workers Comp even if part time.  And most states rules apply for both part time and full time employees.  And many policies also cover volunteers.

Understanding the truth about workers’ comp helps businesses follow the law and makes sure workers get the protection they need.  Find an insurance advisor to provide the correct protection for your business.

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The Hidden Costs of Not Having Workers’ Compensation Insurance

1. Expensive Fines & Penalties

If a business doesn’t have workers’ comp, it can face big fines from the state. In some cases, the government may even shut the business down. Not following the law can lead to serious trouble.

2. Lawsuits from Injured Employees

Without workers’ comp, an injured worker (or their family) can sue the business to cover things such a medical bills, lost wages, and pain and suffering. A lawsuit like this can cost a business thousands—or even millions—of dollars.

3. Paying Medical Bills Out of Pocket

If an employee gets hurt on the job and there’s no workers comp insurance, the business owner might have to pay the medical bills themselves. These costs can add up quickly and put the business at risk.

4. Lost Productivity & Low Employee Morale

Employees want to feel safe at work. If a company doesn’t have workers’ comp, employees may feel unprotected, which can lower morale and productivity. This can also lead to high employee turnover.  Who wants their key employee hurt without getting paid?

5. Damage to Business Reputation

A company that doesn’t protect its workers can get a bad reputation. Customers, clients, and future employees may not want to work with a business that doesn’t take care of its people.

The Bottom Line

Workers’ comp isn’t just a legal requirement—it’s a smart investment. It protects employees, keeps businesses running smoothly, and helps avoid major financial risks. Skipping workers’ comp may seem like a way to save money, but in the long run, it can cost much more than the insurance itself.