If an employee is hurt on the job, employers in most states are required to cover expenses related to the injury, such as medical care and lost wages. Without appropriate workers’ compensation coverage, business owners can be on the hook for substantial sums of money. In some states, they may also be subject to fines and penalties for not having coverage.

Despite this risk, 26 percent of small business respondents to a recent Insureon survey reported that they don’t have any workers’ comp coverage. Given that almost 3 million nonfatal injuries and illnesses occurred in American workplaces in 2016, a lack of coverage doesn’t seem like a risk worth taking.

“Small businesses face several risks by not carrying workers’ compensation insurance,” says Jeff Somers, president of Insureon. “For one, they will likely be forced to pay an employee’s medical bills if they get injured or sickened on the job. And depending on what state their business is based in, employers could also be looking at fines or even jail time if they are found to be in violation of workers’ comp laws.”

The State of Workers’ Comp Laws

There are no clear rules surrounding workers’ comp insurance at the federal level, which means laws governing workplace injuries and insurance requirements can vary widely from state to state. Most states seem to agree, however, that workplace injuries are the responsibility of the employer.

“Laws regarding workers’ comp are decided at the state level, and more than two-thirds of states require businesses to purchase a policy as soon as they hire their first employee,” says Somers. “Even employers who aren’t required to purchase coverage should consider doing so. Otherwise, it could cost them significantly more money in the long run if an employee is hurt.”

Aside from covering the injured employee’s medical bills — which can run as much as $36,551 on average — employers without workers’ comp insurance are also open to lawsuits. Together, these costs can seriously harm a small business’s ability to generate revenue.

Thirty percent of respondents to the Insureon survey weren’t sure if their state required them to carry coverage — but if your business has even a few employees, it’s likely that your state does. According to Somers, Texas is the only state that does not require employers to purchase coverage, although the threshold number of employees a business must reach for coverage to be legally required does vary from state to state. Businesses unsure of the rules and regulations in their state may want to consult Insureon’s state-by-state guide.

Ultimately, the rewards of carrying coverage outweigh the risks. Like most insurance, workers compensation coverage only seems like a hassle until you need it.

This article is for informational purposes only and does not constitute legal advice.

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