All businesses are generally required by state law to purchase workers' compensation insurance on their employees. Although there are still some occupations that are exempt, about 90% of workers now fall under workers' compensation laws. These laws dictate that you, as the employer, are responsible for the costs of any employee injuries that arise out of any employment-related injury (or illnesses from a disease caused by the job), regardless of fault. So, if you have employees, you will need to secure this coverage immediately.
Be aware that although workers' compensation insurance is very wide-ranging, there are complexities and exclusions, of which you should be aware when purchasing such a policy. For instance, coverage does not apply to damages you cause intentionally. In addition to what is covered here, your insurance agent or broker should be able to help you better understand the details of your coverage.
In some states, only the state is allowed to sell workers' compensation insurance. In some states, private insurers compete with state workers' compensation insurance providers. In other states, coverage is sold by private insurers only, and if you cannot get coverage, you may have to purchase it from government-mandated assigned risk plans, also known as "pools." In many areas, it is difficult to find private insurers in this field.
Because of restrictions mandated by states, many insurers no longer offer workers' compensation. If you can't locate an insurer, one thing you can do is to seek out a group plan, which pools a group of smaller buyers, collects all the premiums and loss experiences, and then evenly distributes dividends to the group members if there is a favorable loss history. Group plans are often located through trade associations, sometimes through brokers or agents, and are also referred to as safety groups.
Here is a summary of some other key points that will help you to better understand workers' compensation coverage: