Why Your Business Might Legally Need Workers Compensation Insurance

By | October 17, 2011

An employee injury is a terrible thing – but it’s even more terrible if that injury sinks the business too.

That’s the role “workers’ comp” insurance plays in our society. It can not only protect your employees from loss of income as a result of work injury, but it can protect a business that would otherwise be unable to foot the bill.

It’s not hard to see why a business would need this type of insurance, particularly the businesses that operate with heavy machinery. Factories, manufacturing plants, construction companies and even restaurants have high potential for injury because of the equipment that gets used on a daily basis.

But workers’ compensation insurance isn’t just a good idea. In many cases, it’s legally required of you. So let’s track the development of workers’ compensation over the years and find out how it became standard practice for so many companies – and why it should be standard practice for yours, too.

Early Workers’ Compensation

Working conditions in the 19th century being what they were, it’s not hard to imagine that workers’ compensation back then was actually voluntary, a stark contrast to the rules and regulations of the modern era. Late in the century, a number of laws enacted by states would start to shake this way of doing things – initial laws simply allowed an injured worker to sue an employer in order to receive some monetary reward.

By the middle part of the 20th century – 1949 – every state in the union had enacted some sort of workers’ compensation program or regulation. Today, that means that workers’ compensation insurance is legally required for certain businesses, much like a car owner can’t go without car insurance in some states.

The system in place still allows the states to determine the laws governing workers’ compensation. While the federal government has a workers’ compensation system of its own in place – being the large employer that it is – this system is separate from the systems implemented by each state. Other regulations, such as bans on firing or refusing to hire workers who have been injured, have also made their appearance in state workers’ compensation laws.

Workers’ Compensation in the Modern Workplace

Today, states are still able to decide how to regulate workers’ compensation – in fact, states are allowed so much freedom to do so that some states such as Nevada and West Virginia have actually privatized these systems. The privatization of workers’ compensation has had lasting effects on other states, as only four states utilize a totally government-run workers’ compensation program.

The result? Private insurance companies can still provide workers’ compensation coverage in different areas across the country.

The laws governing the purchase of this insurance, however, are a little more constricting. Businesses are often legally required to carry workers’ compensation insurance even when there are no major risk factors involved – even minor injuries like carpal tunnel syndrome can often be covered.

It’s easy to see why starting a business in this environment can come with a lot of risk – if you have employees, you can often be required to take on this additional expense. Add this to other expenses like the payroll tax, social security taxes, and job benefits, and you begin to see how difficult it can be to hire employees as a start-up company. But when it comes to workers’ compensation, the money is often well-spent.

Saving Companies – and Helping Workers

Given just how important many businesses are to their employees, it only makes sense that workers’ compensation is a high priority and necessary expense. Whatever your thoughts are about additional job benefits outside of income, your business should be able to cover for you if you’re injured while doing a job they hired you for. Many laws take this exact stance, enacting regulation that makes sure this is always the case.

If you’re an employee, this is always good news. Workers’ compensation insurance can provide for two things: first, the money to help you stay on your feet, so to speak. And second, it can help the company you worked for stay afloat and afford the worker’s compensation you need. This benefits both parties and helps keep the economy as a whole running smoothly – though that’s a little hard to claim these days.

If you’re interested in learning more about workers’ compensation insurance, we recommend that you start at home: see what kind of coverage your own company has and then look up the laws in your state. You might be surprised to know how well-covered you are, and this can give you tremendous peace of mind. After all, the nine-to-five is already hard enough.

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