In general, your business is required to have workers' compensation insurance if you have one or more nonfamily employees. Depending on your state, you may also have to provide insurance to part-time workers and contractors. Workers' comp is also mandatory for employees of home-based businesses, although sole proprietorships and partnerships don’t have to purchase workers’ compensation insurance until they hire staffers that are not partial owners.

Typical workmans comp benefits
Workers' comp offers many benefits to employees injured on the job. While the specifics vary from state to state, most policies provide employees with:

• Compensation for a percentage of lost wages
• Reimbursement of medical expenses
• Recovery and rehabilitation services
• Death benefits for families

The exact compensation and benefits an employee gets are based on the type and severity of the injury as well as on the profession. A retail cashier who slips and bruises a hip may get temporary benefits because he can return to work quickly. However, a surgeon who loses an arm would get more substantial and permanent benefits since the injury will prevent her from ever doing her job again.

Requirements
The National Council of Compensation Insurance (NCCI) works closely with insurance companies from multiple states to form the general rules of workers’ compensation. The NCCI determines the cost of premiums, sets the amount paid out in benefits, and writes policy manuals detailing how premiums are calculated.

Because workers' comp is so state-specific, you’ll have to become familiar with regulations in other states if you relocate, expand beyond your locality, or hire remote employees who reside in different states.

Workers' comp advantages

• Reduces lawsuits
• Back-to-work programs ease workers back to the job promptly
• Can reduce premiums with deductibles
• Offers additional tort protection when you demonstrate a commitment to workplace safety
• Allows you to deny claims if you suspect fraud
• Provider handles and processes all claim paperwork

Workers' comp disadvantages

• Can be expensive depending on business risk and location
• Increases medical expenses
• Requires you to stay updated on frequently changing regulations
• Frequent claims could lead to coverage cancellation or significantly higher premiums
• You are responsible for all premiums (can’t pass expense onto your employees)
• May need to manage multiple rates if you work with employees residing in different states