Deciding How to Insure Your Business

Many businesses have several options for obtaining workers compensation insurance. A business can purchase a public plan through the state government, purchase a private plan from a private insurance company, or self-insure. Your options will depend on what kind of business you have and on your location.

Four states mandate that businesses buy into a public, state-sponsored workers compensation insurance plan, so if you live in Washington, North Dakota, Ohio, or Wyoming, you will have to obtain workers compensation insurance from the state. Twenty-one other states offer a public option as well, but also allow businesses to choose a private plan. In many cases, businesses with a high level of risk find the public option for workers compensation insurance more affordable than purchasing a private plan from an insurance company. Because the state government's goal is to protect workers rather than make a profit from selling insurance, states are able to craft affordable plans for industries that have a high level of risk for filing workers compensation insurance claims.

If your business is in an industry that does not have a high workers compensation insurance claim rate, you may find a more affordable workers compensation insurance policy through the private sector. Get quotes from multiple insurance companies in order to determine which policy is best for your business.

Some businesses find that the least-costly option for obtaining workers compensation insurance is to self-insure. This option works well for businesses with an extremely low level of risk, such as retailers or small offices. Self-insurance works by setting aside money to cover the cost of your employees' losses due to a job-related illness or injury rather than paying insurance premiums. Sometimes businesses in the same or similar industries decide to join together and form a self-insurance pool. All businesses pay into the same fund, and if an employee of any business in the insurance pool requires workers compensation funds, the employee is paid through the money set aside in the insurance pool.

If your business is located in a state that allows you to choose between these options, the best workers compensation insurance plan for your business likely depends on your level of risk. Businesses in high-risk industries are likely to find affordable workers compensation insurance through the government, and businesses in low-risk industries are more likely to find competitive prices from a private insurance company or through self-insurance.

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