In nearly every U.S. state, employers are required to carry workers’ compensation insurance. Since states write laws surrounding workers’ comp coverage, each state has different rules and requirements. Workers’ compensation is one of many small business insurance types all South Dakota entrepreneurs should consider.

In this article, we’ll explain workers’ compensation laws in South Dakota—who you need to cover, who is exempt, and possible penalties for non-compliance.


How does workers’ compensation insurance in South Dakota work?


South Dakota is rare in that its laws do not require employees to carry workers’ compensation insurance. However, just because the laws give you a pass doesn’t mean you shouldn’t have insurance. In the event of a workplace injury or illness, employees can sue their employers for medical costs and lost wages if they’re uninsured.

Most employers purchase coverage via the private insurance market. High-risk businesses that are unable to purchase private insurance can get coverage through the National Council on Compensation Insurance (NCCI), South Dakota’s insurer of last resort. Some companies can apply to become self-insurers, though large corporations with substantial capital typically take this route.


Who needs workers’ compensation insurance in South Dakota?


As mentioned above, no law in South Dakota requires you to carry workers’ compensation insurance.

Choosing to go without workers’ comp can leave you open to significant financial risk. If an employee gets injured or becomes ill because of the work they do for you, you could face a lawsuit that’s enough to close down your business. The cost of maintaining coverage is well worth mitigating the risk of paying thousands of dollars in damages after a workplace incident.

If you have any employees at all, strongly consider investing in coverage. Even if you only work with independent contractors, research state guidelines to make sure they wouldn’t be considered employees if they happen to get hurt and file a complaint.

As a business owner or sole proprietor, you don’t have to purchase workers’ compensation insurance for yourself. That doesn’t mean you shouldn’t get coverage. Sustaining an injury or illness while performing your work can lead to sizable hospital bills, medical costs and a lengthy recovery period. Investing in workers’ comp for yourself could save you from a brutal financial setback.


What are the penalties for not having workers’ comp in South Dakota?


Since workers’ compensation insurance is not required in South Dakota, there are no penalties for having uninsured employees. As an employer, you could still be held responsible for covering your employees’ medical costs and lost wages after a work-related incident. So while forgoing coverage means you won’t face any fines, you’re still open to significant financial risk.


How much does workers’ comp insurance in South Dakota cost?


On average, employers in South Dakota pay $1.66 annually per $100 in covered wages.


What does workers’ comp cover?

Medical costs

If one of your employees is injured or becomes ill on the job, workers’ comp can cover their immediate medical expenses such as ambulance rides, emergency room visits, x-rays, surgery and prescription medications.

For example, if a kitchen employee reaches into a sink and slices their hand on broken glass, they might require medical attention. Workers’ comp could cover the costs of their emergency room visit, stitches and pain management prescriptions.

Lost Wages

Many work-related incidents can leave employees unable to work for several weeks or months. Workers’ comp can provide some relief for employees through partial wage replacement.

If an employee breaks their foot in a work-related accident, they could end up stuck at home for multiple months. While they’re out of work, workers’ comp would cover some of their lost wages.

Ongoing Care

Some work-related injuries require long-term care, such as physical therapy or pain management. Often, these injuries result from repetitive workplace stress rather than a single traumatic incident. Chronic back issues for construction workers and carpal tunnel syndrome for office employees are two common examples of the types of workers who might receive ongoing care due to repetitive stress. If their claim is approved, workers’ comp can cover the costs associated with their ongoing care.

Death Benefits

If the unthinkable happens and an employee passes away because of a workplace incident, workers’ comp can cover funeral costs and other death benefits for the deceased worker’s family or beneficiaries.