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A Guide to Workers Compensation for Small Businesses


Having the right kind of insurance is important to a business’ future success. You know that your property has to be insured, for example, and you might already know the importance of health insurance. You should also have some kind of liability insurance to protect your business. One of the most important types of insurance, though, is that which protects your employees. Workers’ compensation insurance is important for businesses of all size, even if some small business owners aren’t aware of how vital it can be to their operation. Once you understand how this insurance works, you’ll never want to operate without workers compensation for small businesses again.

What you need to know about workers compensation for small businesses


Though the issues surrounding workers compensation for small businesses can be complex, there are a few things of which every business owner needs to be aware. You need to know what workers’ compensation really entails, what it really covers, why you need to have it, and where you can get the insurance. Once you know the answers to all of these questions, you can better understand why this expense is necessary and give yourself the ability to get the kind of insurance your company needs to continue successfully doing business in the state of Arizona.


What is workers compensation?


Workers’ compensation is a type of insurance held by a company. It’s generally mandated by the state and plays an important role in helping out employees if they are injured on the job. The simplest explanation of this type of insurance is that it’s meant to cover the cost incurred by an employee who is injured during the course of his or her job. This type of insurance is not, however, only beneficial to the employee. It is generally held that the payment of workers’ compensation comes with the agreement of an employee to waive his or her right to sue the employer for the injury.


workers compensation for small businesses


In many ways, you can look at workers compensation for small businesses as something very similar to your general liability insurance. It goes a bit farther, though, and does much more to help protect your business from future lawsuits. The state of Arizona does mandate that you have this type of coverage, though, so it’s something that you should have by default. Workers’ compensation is one of the very few types of insurance that seems to help the employer as much as the employee.


Do I need to have workers compensation?


The official answer to this question is a resounding ‘yes’. Arizona requires any business that has at least one employee to have some kind of workers’ compensation insurance. Failure to carry insurance can have fairly severe consequences. At a minimum level, a business will be fined by the state not only for the cost of the workers’ compensation that the state pays out from a special fund but also for a separately assessed penalty. Even more concerning, though, is that workers who do not receive compensation can sue the business for negligence and that negligence would be assumed due to the injury.


There are, as always, exceptions to this rule. If you are a sole proprietor who does not have any employees, you are not technically required to carry any type of workers’ compensation insurance. Likewise, you do not have to have coverage if you are only working with an independent contractor. It is possible to insure yourself, however, and it may be a good financial move depending on your type of business. At the very least, you’ll want to explore whether it’s feasible for you to have coverage for anyone who is not technically required to be covered.


Where to get workers compensation insurance?


In Arizona, you’ll get your workers’ compensation insurance from a private provider. This works very similarly to your health insurance and you will pay a premium for your business’ coverage. Generally speaking, the cost of coverage is far lower than other types of coverage and tends to be quite helpful. If you’re unsure of where to look for a provider, you can check with the state. The vast majority of the companies that provide Arizona businesses with workers’ compensation insurance can be found through the Arizona Department of Insurance.


workers compensation for small businesses


As with any type of insurance, your goal should be to find the premium that works best with your budget while still providing an adequate amount of protection for your employees. Shopping around is always a good idea, so don’t forget to get multiple quotes. As ever, it’s generally easier to get a good rate if you’re trying to cover more employees – smaller businesses will have a harder time finding manageable premiums. There are companies that specialize in working with small businesses, though, so it may be useful to ask your peers in the business world about the type of insurance that they use.


What does workers compensation cover?


Workers compensation for small businesses covers any injury that occurs during the process of an employee’s work or that happens to an employee at the time that he or she is on the clock. As such, this can range from industrial accidents to chemical incidents to even slip and fall accidents. Under Arizona law, it does not matter who was at fault for the accident – it simply matters that the incident involved an employee who was working at that time. As such, a remarkably large number of potential events may be covered.


workers compensation for small businesses


This does not, however, mean that every claim by an employee is going to be covered by your insurance. It is up to the insurance company to decide whether or not workers’ compensation ought to be paid out. This can lead to issues in court, of course, especially if the employee and the insurance company do not see eye to eye. What’s important for the business, though, is that having insurance can theoretically help to pay for the costs that are generally incurred when an employee is injured on the job. So long as your insurance is current, you can help your employee recover without putting your business at risk.


Workers compensation for small businesses is an important (and required) part of doing business in Arizona. Having the right insurance will keep your business on the right side of the law and help you to protect your employees. Though getting this type of insurance is an extra cost, it’s one well worth paying when you consider the alternatives. If you are looking to learn more about workers’ compensation or other financial issues that impact businesses just like yours, make sure to sign up for the PayTech newsletter today.