This is one that early stage CEO’s are almost universally unaware of. Most every state requires that any company with employees be covered by a policy of insurance against claims by workers for injury on the job, or worker compensation insurance. Many states has privately owned but state-overseen state insurance funds for this purpose, and of course a number of private companies offer such insurance alone or along with business package policies.
In this increasingly litigious employment environment, it is mandatory for a company of any size to maintain worker comprehensive insurance. I have experienced incidents of claims that seemed quite minor on the surface where the employee was able to claim and receive large payments, sometimes over extended periods, for carpal tunnel injuries, slips and falls, neck injuries and more. Claims worth half a million or more are not uncommon. It may seem like an employee’s lottery win to management, but the fact of the insurance award is real. In most states, the CEO and other executive owners of the corporation may be exempted from the policy and the costs reduced accordingly. Also, each employee is classified according to job performed, with some drawing very high premiums relative to others. With your agent’s help, you should be very careful to place employees in the proper but most advantageous class for the sake of the policy.
Also, you will find all insurers asking for an estimate of gross payroll costs in advance of each policy year. At the conclusion of each year, before renewal, the insurance company will perform an audit of your payroll and bill the company for underestimated amounts, or credit the company for overestimation. These audits are often merely by telephone to your bookkeeper for small companies, rising to physical audits of submitted documents or in person for larger enterprises. Treat such policies seriously. For a reasonable cost, they protect against the strangest and saddest of employee-based corporate liabilities.
