Workers' Compensation Insurance for LLCs

Team meeting with employees and manager

In 2020, there were 2.7 million injuries and illnesses reported by employers. Among those injuries, 4,764 resulted in fatal work incidents.

The impact of a death, serious injury, or illness on a small business could be profound without the protection of Workers' Comp insurance. The potential liability and impending litigation that could come from this could greatly impact a small business.

Workers' Compensation LLC coverage can help protect your small business. You most likely want coverage to help protect yourself, yet you probably want to understand what it entails and what it's likely to cost you, too.

Read on to learn more about Workers' Compensation insurance for your LLC.

What Is Workers' Compensation?

Workers' Compensation is commonly called Workers' Comp. It's a type of benefit intended to protect workers in the event of injury, illness, or death while on the job.

Workers' Compensation is mandated by the government and handled individually by states. Each state has different Workers' Comp requirements.

Many states require almost every business to have some form of Workers' Compensation coverage.

LLC Workers' Compensation insurance can cover an employee with a variety of benefits if they become injured or ill due to their job. These include:

  • Cash benefits like missed wages
  • Healthcare benefits like medical expenses
  • Or both

Yet, as an LLC, while it's likely required in your state, it is your responsibility to find and obtain Workers' Compensation coverage should you need a policy.

Does an LLC Have to Have Workers' Compensation?

You might wonder does an LLC need Workers' Comp insurance. What if you have no employees or only a few employees?

Needing Workers' Compensation insurance is typically based on whether or not you have employees. Remember, the intention of Workers' Compensation is for the protection of employees.

If you run a partnership, LLC, or LLP and do not have employees, you may not need to obtain Workers' Compensation insurance.

If you have a partnership, LLC, or LLP and have employees, in most cases, you might need to acquire Workers' Compensation as part of your business insurance plan.

Some states may allow you to skip it if you have a limited number of employees. While obtaining coverage might not be required, it's always recommended.

How Does Workers' Compensation Work?

LLC Workers' Compensation is purchased by the employer to help cover workplace accidents. Employees can have "peace of mind" that if they're injured or become ill from work, their medical expenses and wages could be covered.

While the intention of Workers' Compensation insurance is for workers, there are also many benefits for your LLC.

As a business, Workers' Compensation insurance could help with several things. Workers' Compensation insurance can shield businesses by:

  • Helping to avoid the risk of getting sued by employees
  • Reduce the liability for a business
  • Help protect the LLC from a significant financial loss due to an employee work-related illness or injury

When an employee is injured on the job, it's their responsibility to report the injury to their immediate supervisor as soon as possible. Then, the employer makes a claim with their insurance provider.

The injured worker should seek medical care right away especially in the event of a serious injury. Often, Workers' Compensation insurers may ask you to see a particular medical provider for care.

Once seen by the medical provider, they fill out paperwork that becomes part of the Workers' Compensation claim to the insurer. The insurer may ask for more information about details related to the injury.

They will also assess the medical team's recommendations and typically provide coverage accordingly.

Considering Risk Management for Your LLC

As you consider Workers' Compensation insurance, it's also important to step back and look carefully at your business and the risk associated with what your employees do.

Businesses have different levels of risk. Some businesses are considered more dangerous than others. As a business, assessing your risk and helping to mitigate it for your employees is essential.

This could be important to your Workers' Compensation insurer when evaluating the risk present for your employees.

An insurer might want to see that you have policies in place to help reduce the risk for employees and prevention policies to help avoid injury on the job.

The level of risk of your business could impact the cost of your Workers' Compensation coverage.

Cost Factors for Workers' Compensation Coverage

Of course, you'll most likely care about the cost of your Workers' Compensation plan. However, it's the goal of most LLC businesses to keep costs down.

The cost of Workers' Compensation coverage varies based on several factors. First, requirements by the state can impact cost since not all state requirements are the same.

Other factors could impact what your LLC pays for Workers' Compensation insurance coverage. This could include:

  • The nature of your business and its risks
  • Your payroll records, including the number of employees
  • The history of workplace incidents at your business

You can work with an insurer to find the best policy to help cover your LLC while still providing quality coverage for your employees.

The Benefits of a Workers' Compensation Plan

While Workers' Comp is intended as employee insurance, it could benefit both you and your employees.

Of course, it provides employees with the security of knowing that if they become ill or injured because of a work-related incident, they may have the coverage they need to get care without it costing them.

Workers' Compensation also provides some benefits to the employer. Since the insurance could pay for injured employee's medical care and lost wages, you most likely will not have to pay out-of-pocket for these expenses.

Workers' Compensation can also provide programs to help get your workers back on the job after an injury, which benefits you as a business.

If something happens and there's a lawsuit filed. The insurance company could help cover legal costs during the litigation.

What's Covered Under a Workers' Compensation Plan?

Let's take a more specific look at what is covered for employees under a Workers' Compensation plan.

Of course, medical care for an injury or work-related illness is covered. This might include an emergency room visit and follow-up care. It can also cover specialists if you need more care following your initial treatment.

Some Workers' Compensation plans will ask you to see doctors who approve and specialize in work-related injuries.

If an employee needs services as part of their healing, including any rehabilitation care, this could be covered.

If an injury prevents workers from returning to their previous job, most Workers' Compensation plans can also cover training to prepare them for a different position.

If the worker misses work due to their injury, Workers' Compensation insurance could also cover a percentage of lost wages for the worker.

In a worst-case scenario, death benefits can be covered if a worker gets killed on the job.

What's Not Covered Under a Workers' Compensation Plan?

It's also beneficial for you and your employees to know that there could be certain situations where Workers' Compensation coverage may not cover an injury.

If the injured employee is intoxicated or under the influence of other drugs while on the job and injured, they typically forfeit coverage under the Workers' Comp plan.

If the employee violates company policy, including safety protocols, and gets injured, they usually are not covered under the plan.

Finally, if a worker gets injured but not while on the job, they probably would not be covered.

Insurance for Your LLC

It's good idea to have a solid understanding of how Workers' Compensation insurance for employees works as you search for the best possible policy for your LLC.

It could also be wise for you as a business owner to work with an insurance provider to consider your business insurance needs.

Understanding Workers' Compensation LLC Coverage and When You Need It

Workers' Compensation LLC coverage is vital to help protect your employees if they're injured on the job. Yet, it also helps protect you as a business from liability for expenses.

If you're in the market for insurance for your LLC, we can help. Contact us today to discuss your insurance needs.


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