Owning and operating your own company can be an exciting way to generate income. Although being your own boss provides you with a certain level of freedom, it also comes with some significant responsibilities. Many companies opt to invest in workers' compensation insurance without really understanding how this type of insurance works.
Here are three things that you need to know about workers' compensation insurance if you plan to open your own business in the future:
1. Workers' compensation insurance protects you from legal damages.
Whenever you pay someone to complete work on your behalf, you become an employer. The employer and employee dynamic makes you responsible for the safety of the individuals that your company is paying to do work.
If an employee becomes injured while performing a job-related task, your workers' compensation insurance policy will help pay for that employee's medical bills and lost wages. If you don't have a valid workers' compensation insurance policy, the injured employee may sue your company for damages. This could result in a significant financial loss.
2. Workers' compensation insurance may not be required.
Money is often tight for individuals trying to establish a new company. Investing in a workers' compensation insurance policy can be costly, so it's important to recognize that you might not need one of these policies in the immediate future.
Workers' compensation insurance is designed to protect certain types of businesses and employees, so you should check with your insurance agent to determine if you need coverage. The number of employees you have, the type of work they are performing, and the employment laws in your state all dictate whether or not you need a workers' compensation insurance policy.
Your agent will be able to evaluate your company and determine the best way to protect you and your employees.
3. You can make your workers' compensation policy more affordable.
If you want to reduce the cost of maintaining a workers' compensation policy, it can be beneficial to eliminate common risks that contribute to employee injury. Making your workplace as safe as possible and investing in ongoing training for your employees will help to reduce the probability that you will need to file a claim.
The safer your company is, the more affordable your workers' compensation policy may be.
Understanding how workers' compensation insurance works will help you appreciate the protection it provides, determine if you need an active policy, and find ways to reduce your insurance costs in the future.