There’s a special moment that marks progress and growth as a small business owner: hiring your first employee. Though technically you’ve always been “an employer” by definition, hiring employees brings this feeling to life.
While this hire comes with a decreased workload for yourself, it’s at the cost of higher responsibility. When working alongside you at the office, remotely, or on a jobsite, you’re responsible for their health and well-being as their employer.
Because of the high costs of medical care, recovery, and lost wages due to a work-related injury, you need to ensure that you’re covered. For this, there’s employers liability insurance.
Let’s dive in.
Employers liability insurance covers employers should one of their employees (current or former) get sick, injured, or die in a workplace-related incident.
You might think this sounds like a workers’ compensation policy. That’s because employers liability insurance often includes workers’ comp as one branch of their overall policy.
To understand the difference, let’s break down the two.
Because these two cover similar areas of a business’s liability, it’s important to note the key differences:
State requirements
Covers work-related injury, sickness, and death
Proving negligence
Exceptions to which positions are covered
Covers cost of lawsuit regarding the work-related injury
Covers traveling injuries
If you have workers’ comp, do you need to switch to employers liability insurance? Or vice versa? Or do you need both?
The answer is, as is often the case, it depends.
Risk profile – Consider your employees’ job demands and create a risk profile of their occupation. Answering the following questions will help you understand both the rate of injury and the cost per injury of an employee:
Cost-benefit analysis – Using this risk profile, structure a cost-benefit analysis to weigh the option of both policies. Consider that a state-mandated workers’ compensation policy will offer you the minimum coverage, thus being the cheapest option. An employer liability insurance that includes additional coverage outside of workers’ comp will cost your business a higher premium, but can protect your financials in the long run.
While the question of having additional coverage is always up in the air for businesses who want to hedge against risk, there is one notable point: No insurance coverage is the wrong answer.
Apart from being mandatory in most states, having a workers’ compensation policy (or one through your employers liability insurance), is a smart business practice.
According to data collected in 2016 and 2017 by the National Council on Compensation Insurance1:
While these are averages across a large number of industries, sectors, and states, it does put the cost-benefit analysis into perspective.
Even if you only have one employee in a low-risk position, having some form of insurance coverage (on average) is beneficial. Whether you need more through an employers liability insurance policy depends on your individual business.
Whether you’re hiring your first employee or your tenth, you need to ensure that you’re covered from any work-related incident. Employers liability insurance and the included workers’ compensation policy can help protect you where no other policy can.
Small businesses need insurance that scales with their business. At first, you may not be required to have workers’ comp due to not having any employees. But as you take on larger clients and expand your enterprise, more employees and the subsequent responsibilities will fall on your shoulders. This means more ways in which your business can be hit financially.
To stay in-the-know and protect your business, there’s Thimble.
Thimble offers general liability insurance and professional liability insurance to cover your business from third-party claims of bodily injury, personal and advertising injury, property damage, and errors and omissions.
It’s flexible coverage that works when you do, so you’re never caught overpaying. To protect your business, download the Thimble app or click “Get a Quote,” answer three questions, and purchase your policy. All it takes is 60 seconds.
And should you want total coverage, Thimble’s business insurance can help protect you from common third-party claims.
Sources:
Our editorial content is intended for informational purposes only and is not written by a licensed insurance agent. Terms and conditions for rate and coverage may vary by class of business and state.
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