Workers’ comp, explained for small business owners
Workers’ comp pays medical care and part of lost wages for job injuries and illnesses, plus rehab and death benefits. It’s no-fault: workers get benefits without proving you did wrong, and in exchange generally can’t sue you over the injury. Most states require it once you have employees, sometimes starting with one. Buy it from a private insurer or a state fund; cost depends on payroll and type of work. Report injuries quickly and never retaliate. Going without required coverage brings fines and costs.
Your checklist
- Know what workers’ comp covers
- It’s no-fault and limits lawsuits
- Check your state’s requirements
- Buy from an insurer or state fund
- Report injuries fast; never retaliate
- Going without it is risky
Rather read it? Here’s the whole thing.
What it covers
For injuries and illnesses caused by work, workers’ compensation typically pays:
- Medical care.
- Part of lost wages while the worker can’t work.
- Rehabilitation and some benefits for lasting injuries.
- Death benefits for families.
How it protects you
It’s no-fault: injured workers receive benefits without proving the employer was negligent. In exchange, workers generally can’t sue the employer over the injury, with some exceptions.
Is it required?
Most states require coverage once you have employees, some starting with your first employee and others at a set number. Rules for corporate officers, family members, and certain industries vary. Contractors usually aren’t covered, but misclassified workers may be treated as employees.
How to get it
- A private insurance company or agent.
- A state fund in some states (and a few states require using the state fund).
- Some payroll providers offer pay-as-you-go plans.
- Larger businesses may self-insure with state approval.
Premiums are based on payroll, job classifications and claims history.
When someone gets hurt
Make sure they get care, report the injury to your insurer promptly, complete state forms, post required notices, and never discourage or punish a claim; retaliation is illegal in most states.
Going without
Operating without required coverage can bring fines, stop-work orders, and responsibility for paying the injured worker’s costs yourself.
Official sources, and where to look
- U.S. Department of Labor: workers’ compensationdol.gov
- SBA: get business insurancesba.gov
- OSHA: workplace safetyosha.gov
[your state] workers compensation employer requirements[your state] workers comp state fund
Common questions
How much does workers’ comp cost?
It depends on your state, payroll and the risk level of the work. Office jobs usually cost far less than construction. More ›
Do I need workers’ comp for myself as the owner?
It depends on your state and business type. Many sole owners can choose whether to cover themselves. More ›
Is workers’ comp required for small businesses?
Most states require it once you have employees, some starting with one employee. Check your state’s rules. More ›
What does workers’ comp cover?
Medical care, part of lost wages, rehabilitation and some lasting injury and death benefits for work-related injuries and illnesses. More ›
How much does workers’ comp insurance cost?
It depends on your state, payroll, job types and claims history. Higher-risk work costs more. More ›
Can an employee sue me if they have workers’ comp?
Generally not over the work injury itself, since workers’ comp is the exclusive remedy, with some exceptions. More ›
Know someone who needs this?
Not yet reviewed by an expert. Last checked 2026-10-29. This is general help, not legal, medical or professional advice. Rules are different in every state.