Small Businesses: Making Important Decisions about Workers’ Compensation

Every new business goes though the basics: writing a business plan, choosing a business location, arranging financing, obtaining a tax identification number, business licenses and permits. It is a lot of work just to get started. Yet, even after all those necessities are completed, there is still one very important step you need to take—purchasing Workers' Compensation insurance. Not only is Workers' Compensation insurance required in North and South Carolina, it is also an important factor in helping protect both you and your employees from life’s unexpected circumstances.

While every business needs Workers’ Comp Insurance, few know why, or where to start. If you have a small business or plan to start your own business, you need to know what Workers Compensation really is and why it is an investment in your future business success:

What is Workers' Compensation Insurance?
Workers' Compensation insurance covers the medical and rehabilitation costs and lost wages of your employees if they're injured while on the job. In most cases, having insurance that covers these costs dictates that employees give up their right to sue your business for negligence. Depending on the severity of an injury, benefits may be paid for a lifetime. Your employees have the assurance that they can pay for and recover from work-related injuries without the difficulty of a costly lawsuit.

Why do I need Workers Compensation?
Most importantly, your small business must carry Workers' Compensation insurance because North and South Carolina require it after 3 or 4 employees respectively. In fact, most states do, and state-levied penalties for not carrying Workers' Compensation can be quite steep. Safety services are provided by insurance companies to help reduce the frequency and severity of workplace injuries.

When should I buy workers' compensation?
In North Carolina, “The North Carolina Workers’ Compensation Act requires that all businesses which employ three or more employees, including those operating as corporations, sole proprietorships, limited liability companies and partnerships, obtain workers’ compensation insurance or qualify as self-insured employers for purposes of paying workers’ compensation benefits to their employees.”^{^[1]}

There are few exceptions to this requirement. If you have any questions, you should always contact your insurance agent.

In South Carolina – the rule is similar: “any employer who regularly employs four or more workers full-time or part-time is required to have workers' compensation insurance.”[2] There are some exceptions here as well, including agricultural employees, railroads, and railway express companies and their employees. Employers who had a total annual payroll during the previous year of less than $3,000 are exempt as are certain commission paid real estate agents.

Is coverage expensive?
Loss cost advisory rates are calculated for each job classification annually. Each occupation is assigned a "risk classification" determined by the frequency of injury at work and severity of the injury. Then the classification is assigned a rate based on the risk. Your premiums can be increased or decreased based on your business' safety history, whether you offer health insurance, and other factors. Each insurance company develops their own rates, so rates can vary significantly.

Regardless of your business type, if you have employees, you should have Workers’ Compensation Insurance! Contact your agent today to learn more, and find out how you can protect yourself, your business, and your employees.

[1] http://www.ic.nc.gov/wcinsrqmt.html

[2] http://www.wcc.sc.gov/Pages/FAQEmployers.aspx

Small Businesses: Making Important Decisions about Workers’ Compensation

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