FAQs: Workers comp insurance for small businesses

Every small business is unique, but they all share some common insurance needs. 

Your business, at a minimum, needs liability and property protection to protect against common risks. And if your business has employees — even just one — you can add workers compensation insurance to that list. 

Why is that? The short answer is because it’s the law, but workers comp insurance also provides crucial protection for your business and employees. 

Because workers comp is such a common coverage, we answer a lot of questions about it. Here are a few of the queries we hear most often, and insights to point you in the right direction. 

What is workers comp insurance? 

Workers comp insurance is currently required of businesses with employees in every state except Texas. It covers medical care and lost work wages for employees who are injured on the job, whether due to a sudden accident or a long- term occupational hazard. It also protects the employer from legal fees and financial settlements sought by injured employees claiming negligence. 

Some workers comp insurance policies cover transportation expenses for medical appointments or have other benefits, such as a nurse triage program (see below), but allowable coverages are set by state law. Talk with your UFG agent to discuss the requirements for your area. 

Doesn’t my general liability coverage protect against injuries and claims? 

No, not when it comes to work-related occupational injuries. Your general liability coverage, often included as part of a businessowners policy, or BOP, covers injury and property claims by clients, customers or vendors. Only workers comp can cover employee injuries.

In addition, when a business secures workers comp insurance, employees typically lose their ability to sue by law. 

Who counts as an employee? 

This varies by state, but most laws classify people working under contract of hire to be eligible for workers comp benefits. Some states exempt certain categories of workers, such as seasonal and agricultural employees, domestic workers and relatives, while others do not require workers comp coverage below a certain number of employees (such as three or five). In those cases, a state may or may not include owners and executives in the count of employees.

We recommend talking with your UFG agent to discuss your state-level requirements and the specific needs for your business. 

Can I wait on workers comp until my business is bigger? 

It can be tempting to skip workers comp coverage for your small businesses, especially if your company is small and doesn’t do physical labor. Don’t make that mistake. 

Many state regulators levy civil fines and even criminal penalties on businesses that skip workers comp coverage. Even in Texas, where workers comp insurance is optional, the potential financial pain is hard to swallow: According to the state’s workforce commission, “going ‘bare,’ or without coverage, leaves an employer open to personal injury lawsuits from employees who are injured on the job … the damages and attorney's fees are almost unlimited.” 

Beyond the legal implications of workers comp insurance, there are also personal and ethical reasons for securing coverage. Your employees are the heart and soul of your business, and key to your success. By showing them they’re protected from workplace accidents, you can build trust and loyalty among your team. 

How are premiums set for workers comp insurance? 

Premium pricing for workers comp insurance is based on a number of factors and can vary widely, even within the same state and industry. Insurers take into account your company’s size, payroll, industry and claims history in determining rates. 

Companies in more demanding physical fields, including construction, landscaping and cleaning, can expect to pay higher premiums than those in retail or accounting, for example. 

How do I select the best workers comp insurance for my small business? 

There are many considerations that go into picking a workers comp insurance policy. The right policy needs to meet your state-level requirements, fully protect your business and employees and fit into your budget. The best workers comp insurance policies will also provide gold-standard claims service and useful added benefits, such as medical and telehealth services. 

UFG Insurance workers comp policyholders, for example, have free access to instant medical triage services from CorVel health solutions. With one toll-free call, employers can speak with a registered nurse specializing in occupational injuries who can make care referrals and connect employees with a telehealth physician if needed. 

Picking the best workers comp insurance for your small business can feel like a big task, but it really just boils down to finding a knowledgeable agent you can trust. If you need a hand, reach out to a UFG agent — we can cut through the noise and help you tailor a policy that meets all your needs.