Buying worker’s compensation insurance for your small business can benefit you in some ways. For example, it can reduce your cash flow, protect your company from lawsuits, and shield you from liability if your employees are injured.
Protects Companies From Lawsuits
Getting sued is a stressful experience and can take a toll on your business. But getting business lawsuit insurance can help reduce the risk of being sued and protect your company’s bottom line.
There are three types of business liability insurance: general liability, workers’ compensation, and employment practices liability. Each provides a different level of protection. In addition to covering bodily injury and property damage, general liability coverage typically covers legal costs and settlements.
A workers’ compensation insurance for small businesses is also important. It covers medical costs and lost wages for employees. It’s also a legal requirement for US-based businesses with three or more employees. Failure to offer it can lead to regulatory penalties.
Another type of insurance, product liability, protects against third-party claims of injury. Insurers can adjust the policy to fit the needs of a specific product. It can also cover expenses for public relations, credit monitoring, and legal fees.
If you operate a business that provides professional services, errors and omissions (E&O) insurance is a good option. It can protect your company from lawsuits no matter who is at fault. The cost of a policy will depend on your business type, the number of employees, the deductible, and the policy’s limits.
Shields Employers From Liability
Several states have enacted laws to shield employers from liability if employees are injured on the job. Some laws are so broad they don’t cover anything, while others are more specific.
One of the most common ways to shield a business from liability if an employee is injured on the job is through workers’ compensation insurance. These policies protect employers from civil and tort liability. However, they can be costly, especially if you must comply. Of course, you can skip the coverage, but you are still at risk of a lawsuit.
In some jurisdictions, you aren’t required to carry workers’ compensation insurance, but you should. Some of the best ways to shield yourself from liability are to update your signage and practices. Creating a robust internal complaint resolution system is also a good idea. This allows you to address issues before they turn into a lawsuit.
Some jurisdictions have also enacted laws to shield businesses from liability if they injure customers. These aren’t as comprehensive as the state or federal laws. But the ones that are on the books are a good start. You should be aware of the coronavirus laws in your state, and you should be proactive in updating your policies and signage to keep you on the right side of the law.
Transfers Financial Risk of a Workplace Accident to the Insurance Company
Using a worker’s compensation insurance policy is smart if you have employees. Suppose you do not have one; you could find yourself on the hook for a large bill. However, it is not a requirement. Depending on your state of domicile, it may be a good idea to have your ducks in a row before taking out a policy. The benefits of having a solid insurance plan can be overwhelming. In most states, employers are required to carry workers’ compensation insurance. If you do not have it, you could face fines or, worse yet, have your employees sued. If you have a well-crafted workers’ compensation insurance policy, the chances are slim that your business will be sued. Besides, having a workers’ compensation insurance plan is the only way to be sure you can pay your workers a fair wage.
The best way to purchase a workers’ compensation insurance policy is to do your homework and ask questions. A qualified agent can help determine if a workers’ compensation insurance plan suits your business.
Reduces Cash Flow
Buying workers’ compensation insurance is a large expense for any small business. The insurance can cost several dollars for every $100 of payroll paid by each employee. In addition, many employers must pay the premium upfront, which can negatively affect their cash flow. However, some options can help reduce the premium needed for a small business.
Pay-as-you-go workers’ compensation is a program that allows a business to pay smaller premiums throughout the year. This helps to avoid overpayment. It also minimizes the likelihood of a major premium adjustment.
Pay-as-you-go policies require a relatively small down payment and can be particularly beneficial for seasonal businesses. However, traditional workers’ compensation premiums can burden a small business’s operating cash during the first few months of the year. The estimated annual payroll is used as the basis for the downpayment. The estimated annual payroll is the total payroll a business expects to pay employees during the twelve months of the policy. The insurance carrier will compare the estimated payroll with the actual payroll.
Pay-as-you-go insurance can benefit some businesses, but the decision must be made carefully. It is important to get professional advice before making drastic changes.