What is workman insurance, and does an LLC require it?

LLC stands for limited liability company and combines the features of a partnership and corporation. Just like partnerships, they have a pass-through taxation structure, in which any income earned by the company is passed on to the owners, who must report it as income tax returns.

However, like corporations, the owners are protected from personal liability in case of business debt, claims, or failure. They lose only the invested amount in the company rather than their assets like cars, houses, cash, etc.

But what about having workman insurance? Do companies of this size and nature require insurance for their workers? Knowing this is essential because insurance prevents your company from being sued or bearing the financial costs if an employee meets with an accident, is seriously injured, or falls ill at the workplace.

If your state laws require you to cover your employees through workers’ insurance and you don’t, you could be fined, jailed, or even sued.

Here’s some information on the topic you might find helpful.

What is workers’ compensation insurance?

As mentioned earlier, it provides coverage to the employees and pays for their medical and rehabilitation costs. Besides financially supporting the employees, it also protects the company from being sued by the employee or their families.

Thus, it is advantageous for both the business and the workers.

What areas does it cover?

Workers’ compensation covers common injuries like slips, trips, and falls, motor vehicle accidents, repetitive motion injuries, and cuts and lacerations. It also covers uncommon injuries like food poisoning from catering (provided by the company), bruises from team-building events, third-degree burns, etc.

The areas not covered are psychiatric conditions, employees involved in anti-company policies, self-inflicted injuries, and accidents while commuting to and from work.

Do all states require coverage?

Most states require businesses to have coverage for their workers (full-time or part-time), and not having one carries various penalties. However, every state has unique requirements, depending on the number of employees in a company.

For example, if your company is in an NCCI state, you must provide your employees with insurance, even if you have more than one employee working for you. It is better to contact the State Workers Compensation Board to know if having coverage is mandatory for your employees.

Should all LLCs provide insurance?

Since a limited liability company usually has more than one employee, the states will require them to have insurance for their employees. However, even if the law does not make it mandatory to provide coverage, having one is beneficial in many ways.

Besides being protected from lawsuits, it ensures you don’t lose clients. Most clients prefer working with companies with worker’s comp because it prevents them from dealing with the hassle of workplace injuries or potential lawsuits.

How much does it cost?

Usually, employers pay 1 USD for every 100 USD of wages, but the specific amount might vary depending on the kind of business, operational history, and jurisdiction it is in.

How to choose an insurance provider?

You should look for insurance companies that specialize in providing insurance to small-scale companies, including LLCs. Enquiring about the fees beforehand, their terms and conditions, and the month-to-month pricing policy is advisable. The provider should also have transparent policies.

You should consider having workman insurance even if you are an LLC. It protects you from facing lawsuits from injured workers, penalties, and permanent closure of your business and ensures that your clients are comfortable working with you.

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