Workers’ compensation insurance operates like most other insurance programs, except this insurance policy is specifically for businesses.
By paying for coverage, your insurance policy can provide medical and wage benefits to workers who are injured on the job or become sick at work. There are incentives for both workers and employers for acquiring this type of insurance coverage.
For workers, there is a guarantee that they will be paid wage and medical benefits if they become sick or injured on the job. The insurance is a social contract between them and their employer.
For employers, workers’ comp insurance can protect them from civil lawsuits from injured employees. If an employee is hurt or becomes ill on the job, your insurance policy can take care of much of their wage and recovery payments. You are shielded from liability and typically only need to pay a fraction of the compensation instead of the entire sum.
Workers’ compensation is the nation’s oldest insurance program. In 2014, payments from workers’ compensation programs totaled $62.3 billion according to the Social Security Administration.
If you’re a California employer, it’s important for you to understand how this type of insurance applies to you because it is required by California law for you to have it. Nonetheless, coverage requirements exist on a state-by-state basis, so here are some common workers’ comp FAQs for the state of California.
Is Workers’ Compensation Insurance a Requirement in California?
California employers are required by law to have workers’ compensation insurance, even if they have only one employee.
If one of your employees becomes sick or injured at work, you are required to pay for workers’ compensation benefits. Having insurance guarantees you can pay for important things like medical care, disability benefits (temporary or permanent), supplemental job displacement benefits, and death benefits, among others.
If you are a California employer and you are found to be operating without workers’ compensation insurance, you could face steep penalties, such as:
- A fine of at least $10,000
- Imprisonment in country jail for up to one year
- Additional penalties up to $100,000
If an employee becomes sick or injured while working for an employer who is illegally uninsured, they may seek benefits from the Uninsured Employer’s Benefits Trust Fund (UEBTF).
What Businesses Need Workers’ Comp in California?
Every business that retains full or part-time employees needs workers’ compensation insurance in California. However, there may be some exceptions.
Partnerships, sole proprietorships, and self-employed people who are the sole individuals working at their business may not require workers’ compensation insurance, but this depends on their industry and the nature of their work. Even if it is not required, you may wish to buy insurance for your partnership or sole proprietorship.
Additionally, businesses that only work with independent contractors are not liable and may not need to purchase coverage for those contractors unless their work is particularly hazardous.
However, you should be aware of California’s employee classifications. When deciding whether an individual is an independent contractor, California courts will look at several factors, such as:
- The amount of control your business has over that person’s work
- Whether the individual is working on-premises and under supervision
- Whether the individual is aware they are classified as an independent contractor and not a regular employee
- How the individual’s work hours are enforced
- How the individual is given payment and whether taxes are being withheld
There have been multiple cases in which employers have had to pay hefty penalties because they illegally classified their employees as independent contractors. Even if you only have a single, part-time employee, you need to acquire workers’ compensation insurance if they are not an independent contractor.
How Do You Buy California Workers’ Compensation Insurance?
Luckily, there are plenty of cheap workers’ compensation insurance programs available from insurers like Strong Tie Insurance. Even if you have a business owner’s policy, you’ll typically need to purchase a workers’ comp policy as well.
To purchase workers’ comp insurance, simply find a provider and reach out for a quote. Some insurance providers offer cheap workers’ compensation insurance options that small businesses can easily afford.
What Must Workers’ Comp Insurance Cover?
Although there may be multiple insurance options available on the market from multiple providers, all workers’ comp insurance programs should cover:
- Medical costs to treat immediate employee injuries and illnesses
- Lost wages
- Ongoing care
- Death benefits and funeral costs
- Legal costs
Does Workers’ Comp Cover Independent Contractors and Self-Employed Workers?
Independent contractors and self-employed workers are not covered by workers’ comp policies, nor are employers required to purchase workers’ comp insurance to cover these individuals.
What’s the Difference Between Workers Comp and Other Insurance Policies?
Although workers’ comp insurance may sound similar to other business insurance policies, it differs on multiple levels. For one, it is a legal requirement. It is a criminal offense in California to operate a business without workers’ compensation insurance if your business has employees.
Furthermore, your employees do not pay into this insurance policy. You are solely responsible.
It also differs in terms of coverage when compared to employer’s liability insurance and general liability insurance.
Employer’s Liability Insurance
If an employee files a negligence lawsuit related to a work-related illness or injury, this type of insurance policy will cover your legal expenses. Unlike workers’ compensation insurance, payments are made for:
- Your attorney fees
- Your court costs
- Any settlements
Employer’s liability insurance is designed to help your business survive a lawsuit. An employee has the option to file a negligence lawsuit even if you have workers’ compensation insurance that covers their medical costs and other expenses.
General Liability Insurance
General liability insurance, also known as business liability insurance or commercial general liability insurance, is a broad type of insurance policy that covers general business risks. For example, it can help protect your business and your employees from liability for the following:
- Bodily injury
- Property damage
- Reputational damage (such as libel and slander)
- Advertising errors (such as false advertising or copyright infringement)
- Medical payments (if a customer sustains an injury at your business)
- Damage to rental properties
Satisfy All Your California Workers’ Compensation Needs
If you need to satisfy the law and protect your employees, it’s relatively easy to obtain California workers’ compensation insurance.
Contact Strong Tie Insurance today to get a quote for our cheap workers’ compensation insurance. We’ll also respond to any of your questions or concerns promptly.