If you’re opening a new business, there are several tasks to complete. Even if your company is small, it’s crucial to have a system in place to pay workers if they are injured while working on behalf of your company.
In most states, employers with three or more regular employees must carry workers’ compensation. However, new businesses often make some mistakes when it comes to providing the right type of compensation to injured workers. Here are some issues you should be aware of so you can avoid lawsuits that could put your business in jeopardy.
Workers’ Compensation Is Not the Same as General Liability
If you’re buying small business insurance for your new company for the first time, you may think that general liability will cover you if one of your team members is hurt on the job. However, it’s important to make sure you have a policy specifically for workers’ compensation.
General liability doesn’t cover a workers’ comp claim, and your workers’ compensation insurance won’t cover the cost of liability. Instead, your general liability policy pays third parties who are hurt on your property. This form of liability insurance will also pay for medical costs or legal fees when people file a claim against your business.
It’s also important to note that workers’ comp liability doesn’t work the same as other insurance policies. You can’t always set your coverage limits for workers’ compensation since you’ll have to make sure you have the correct amount to pay injured employees should the need arise. You can select limits, but you have to understand what these limits mean.
You Need Both Parts of a Workers’ Compensation Policy
There are two parts to a workers’ compensation policy: employee benefits and employee liability. Employee benefits cover rehabilitation and medical costs, as well as lost wages when an employee is recovering. Employee benefits also pay death benefits to the employee’s spouse and/or children.
Employee benefit claims don’t have exclusions or limits, and can’t be denied unless you can prove workers’ compensation fraud. Employee liability, on the other hand, is put in place if a worker has reason to believe that they were hurt due to negligence on the part of your company. Fair compensation can support workers in recovering at home and getting ready to return to work.
If an employee sues you for damages in addition to requesting workers’ comp benefits, your employee liability policy will pay for the worker’s legal defense and any settlement funds the employee is entitled to. Employee liability does have limitations, and you can decide when to purchase this policy.
You Can’t Have “Additional Insured” Individuals On Your Workers’ Comp Policy
As a business, you can’t place an “additional insured” status on your workers’ compensation policy. This means you should decide whether your company needs a separate workers’ comp policy. Check the regulations for your state so you’ll know the rules for covering subcontractors and contractors who do work for your company.
“Additional insured” is a type of liability insurance that is applied to insurance policies like car insurance or general liability. “Additional insured” means you’re providing benefits of your policy to individuals or companies you’re doing business with, and this is usually a requirement for most businesses.
In some cases, you may have to hire a company to keep contractors on their workers’ compensation policy. If you decide to do this, make sure you contact your insurance company and ask about a worker’s comp policy modification. However, the “additional insured” policy is not the same as workers’ compensation. Workers’ comp only covers your direct employees.
As a new business owner, it’s important to hire a qualified lawyer to ensure you’re meeting the correct standards for insurance. Once you find policies that will work for your business, have an attorney look over the information for you and give you pointers for how to make sure you’re in good legal standing at all times.
