Workers’ compensation insurance is a valuable investment. Companies with employees benefit from it. The workers within those companies also benefit. Yet, if you own a very small business, you may not be sure it is worth the investment. It’s important to understand how workers’ compensation can help you and when it applies. In situations of a sole proprietorship, it may not be as valuable as it may seem. Here’s a closer look.

Workers’ Comp Covers Workers

The easiest way to eliminate your need for workers’ compensation coverage is to recognize what the coverage offers.

If your sole proprietorship is very small and does not have any employees, there is no real value of having a workers’ compensation insurance policy in place. It covers just your employees – it usually does not cover subcontractors or those you hire on as independent contractors. In this situation, it does not offer any benefit to you.

However, if you work with clients who require workers compensation insurance, you may need to carry a policy anyway. For example, perhaps your business – which you run yourself – provides consulting services. Another company wants to hire you to do the work they need. They might require all of the businesses they work with to have verifiable workers’ compensation insurance policies in place.

If this is not there, they may not hire you. In this situation, having a policy may be important to your company’s ability to work with such clients.

Small Companies with Few Employees

Most states require medium and larger companies to have workers’ compensation insurance in place. However, if your company is small, perhaps with just a handful of employees, this is not always legally required.

However, you may wish to consider the value of having it nonetheless. If a worker suffers an injury, it could amount to thousands of dollars in losses to you. To avoid this out-of-pocket cost, purchase a policy for your small company.

When your risks are low, your costs for this form of business insurance are also probably going to be low. That’s why it can be a worthwhile investment even for sole proprietorships with few to no employees. Yet, it is worth talking to your insurance company about to determine how much it may cost your business. Most companies benefit from it, though. Contact us today for more information.