Why small business owners need more than just workers’ compensation insurance

Business owners are always in a quandary. On the one hand, there is the freedom of being your own boss and setting your own goals. On the other hand, you become someone else’s boss and assume responsibility for their well-being.

Since being an entrepreneur or business owner entails not only responsibility but also risk, certain types of insurance can be their best friend. With work-related illness and injury a not-infrequent occurrence, sometimes involving a third party, insurance is as a boon that helps protect the business.

Meanwhile, the majority of states require employers to carry workers' compensation insurance. This type of insurance pays for medical bills, rehabilitation costs and lost wages for employees who are injured at work. For small business owners, the usual annual workers' compensation premium is $450 per employee, but this varies by industry, payroll and business location.

Work injury statistics and the need for workers’ comp

So, how common is injury on the job? The U.S. Bureau of Labor Statistics estimated there were 2.8 million workplace injuries in 2019. That translates to 2.8 workers out of every 100 full-time employees. And this figure does not include temp workers or state and local government employees.

While the number of annual work injuries is on a downward trend versus previous years, the possibility of injury remains. Business owners can reduce their risk of being sued in the event of an employee’s work-related injury, or even death, by securing workers’ compensation insurance to provide a financial and medical care safety net for staff.

This coverage can also be extended to the business’s owners and coupled with a general liability insurance policy, which protects their assets and individuals who might not be related to the business, such as customers. Once these two types of insurance are in place, a proprietor is ready for many possible problems that could arise during normal business operations.

Other workplace injury findings in the BLS data pertain to:

Lost work – Workplace injuries accounted for a median eight days away from work for employees. To circumvent the uncertainty for employees and employers in situations like these, and to offset the costs for both parties, unemployment insurance provides workers with a payout in the event they lose their job, and business interruption insurance compensates owners in the event a firm undergoes an interruption due to an employee injury or any other reason.

Work fatalities – Fatalities in the workplace crept up in 2019, even though injuries declined. BLS noted a 2% increase in workplace fatalities in 2019 versus 2018, which in itself was a 2% jump from 2017. Most of these fatalities involved transportation-related incidents, which accounted for 40% of all work fatalities in the U.S. in 2019. This concerning statistic suggests businesses should carry commercial auto insurance that protects not only your company vehicle, but your employees as well. Reimbursement will be paid if someone using the vehicle is injured during the course of the business.

Overexertion and bodily reactions – Transportation accidents account for the majority of workplace fatalities, but overexertion and bodily reaction/physical response were the leading causes of injuries resulting in the most days away from work. The latter accounted for 275,590 cases across all industries in 2019. Contact with equipment was the major contributing factor in industries like manufacturing (45,960 cases); construction (26,120 cases); and agriculture, forestry, fishing and hunting (5,790 cases). But slips, trips and falls caused the most days of missed work in leisure and hospitality (31,550 cases); professional and business services (19,540 cases); financial activities (9,570 cases); and mining (1,890 cases).

On top of the business insurance types described above, others to consider are:

Business owner’s policy - A comprehensive package tailor-made for business owners that may contain one or more policies.
Property insurance - Protects tangible and intangible, movable and immovable assets from damage and loss. One of the first types of insurance most business owners take.
Cyber liability – Increasingly important as so much work is done online and may entail sensitive data. Your business’s dependence on the web makes it susceptible to cybercrimes, and this type of insurance confers protection.
Product liability insurance - Aimed at businesses that create products for sale to customers. In the unlikely event of product failure, it shields you from liability and covers affected customers’ medical costs.
Home-based business insurance – Newly popular as more entrepreneurs have begun working from home. Your home is considered a workplace and a residence under this type of insurance, which offers coverage in the event of injury.
Key takeaway: Workplace insurance, including workers’ comp, is an absolute must for business owners. These types of policies reduce the risk of workplace litigation and eliminate the risk of fines and penalties if you are out of compliance, while also providing injured employees with resources like medication, surgery, rehabilitation or disability compensation. Always remember, prevention is better than cure. And when it comes to matters of coverage for your business, seek the help of an expert familiar with the many nuances of different types of business insurance.
Source: Escalon Services