How to Get Workers' Compensation Insurance

Workers’ compensation insurance, commonly called workers’ comp, offers benefits to employees who incur injuries or suffer from an illness due to their job. It covers medical expenses, ongoing care and rehabilitation, disability benefits, income replacement and funeral costs.

Depending on the state, this type of business insurance may be a requirement that employers need to meet. Learning how to get workers’ comp for your business provides financial protection to your employees and prevents possible legal issues.

• How to Get Workers' Compensation Insurance in Five Steps
• What You Need to Get Workers’ Compensation Insurance
• Where to Buy Workers’ Compensation Insurance
• What Happens if You Don’t Get Workers’ Compensation Insurance?
• Frequently Asked Questions About Getting Workers’ Compensation Insurance

The specific process to get workers’ compensation insurance may vary greatly depending on your location. Each state has its own regulations. That said, there are a few general steps business owners can follow.

Most states require businesses, even smaller ones with at least one employee, to get workers’ comp. Although not necessarily a requirement, it may also be a good idea for some self-employed workers to buy a workers’ comp insurance policy.

Before asking for a quote, you will need to prepare certain information to ensure accurate coverage and suitable rates. These typically include the following:

• Business name
• Number of employees
• Payroll amount
• Type of work
• Coverage levels
• Claims history, if applicable

Insurance companies and brokers may also ask for proof of financial stability. This can be in the form of financial reports.

States also regulate workers’ comp insurance providers. The most common sources of policies include private insurance companies, state funds and agents or brokers.

Whether you should get workers’ compensation insurance from a private insurer or a state fund depends on factors such as rates, coverage offerings and location.

Private insurers refer to privately owned companies. These insurance providers often sell various types of insurance products. They have their own rates and coverage level offerings. Depending on your qualifications and eligibility, you may also find discount opportunities from private insurers.

State funds, on the other hand, are owned and operated by the state. They only offer workers’ compensation insurance policies to employers. In monopolistic states, state funds are the only source of workers’ comp.

Laws governing workers’ comp insurance vary per state. Employers who don’t maintain the insurance requirements will face penalties, which may range from fines to suspension of operations and even imprisonment. The severity of possible penalties also depends on the state.

For instance, failure to provide workers’ compensation insurance is considered a criminal offense in California — it may lead to a fine of up to $10,000, imprisonment up to a year or both.

In New York, failure to have coverage can either be considered a criminal or civil offense. Businesses that don’t provide coverage for at least 10 consecutive days will have to pay up to $2,000 for every 10 days of non-compliance or no more than twice the cost of compensation for their payroll for the said period. Employers with five or fewer employees that have been uninsured for 12 months may be charged a $1,000–5,000 fine. Those with more than five employees that have no coverage for 12 months will have to pay $5,000–50,000 on top of other applicable penalties. Subsequent violations will lead to more severe penalties, such as a conviction.

Getting workers’ compensation insurance provides employee and employer protection. MoneyGeek answers some frequently asked questions to help you find the right policy.