Operating a business requires having to provide certain insurance coverage to employees.
The laws on insurance for small business in the U.S. vary from state to state. Some types of insurance are required by law depending on the structure of the business, if it has employees and where it is located. For example, while a small business may provide health coverage for its employees, there are no federal or state laws on insurance that make it a requirement. However, any small business with employees must carry workers' compensation insurance coverage.
Workers' Compensation Insurance
Workers' compensation insurance is required for any small business with employees. It provides coverage for employees in case they are injured on the job and will pay for expenses related to medical bills, rehabilitation and lost wages. The insurance laws regarding this coverage require that the employer has to obtain a policy through an insurance company or through an available program through the state. If an employee is injured while working, the employer is responsible for filing the claim once the injury is reported. Since workers' compensation is required by law, any small business that fails to carry it may have to face legal penalties and have to pay out of pocket for any costs associated with an employee's injury or death. The laws on insurance exempt sole proprietors and partnerships from having to maintain workers' compensation for the business.
Unemployment Insurance
Although unemployment benefits are paid through federal and state agencies, the funding comes from the employers of the workers who lose their jobs. The laws on insurance for a small business state that if you have employees, you have to contribute to your state's program based on your payroll. Your contributions are made through the unemployment insurance tax that you are required to pay. If you have to lay off employees or let employees go because of job performance, they may be eligible to apply for unemployment insurance and collect benefits while they seek another job. As a tax-paying employer, you have the right to appeal a claim for unemployment benefits if the employee quit or was fired due to disciplinary problems such as excessive tardiness.
Disability Insurance
Disability insurance provides for partial wage coverage for employees who become disabled and are unable to work due to an injury or illness that is not work related. Small businesses can offer short-term and/or long-term coverage so that their employees are covered if their disabilities last for a few weeks or several months. Your employees can receive a percentage of their wages while they are recuperating from their disability. You have the option to offer this benefit as a small business owner, as insurance laws do not require this coverage unless you live in California, Hawaii, New Jersey, New York, Puerto Rico or Rhode Island.
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