While workers’ compensation is mostly a mandated situation throughout the country, it remains an important factor in lowering your overall exposure and risk. While the concept and the laws are fairly standard, they can differ from state. This is where your insurance advisor can help put together a plan for your business that will satisfy the law as well as minimize a huge risk for your small business. In addition, you and your insurance advisor can put together a complete coverage plan for specifically for you.

One of the key factors in determining your coverage is the nature and classification of the work being done by you and your employees. Once your business has been classified, mostly based on the hazards involved, then a premium can be determined. So many small businesses are inadvertently overpaying for coverage simply because they have not taken the time to put together accurate classification data together for their insurance advisor.

Workers’ compensation came into existence in 1911 when Wisconsin passed laws requiring that ill or injured workers would be reasonably compensated for with regard to any injuries or illness that they received at work that prevented them from working. Soon, nearly every state had such laws and the risk involved is something businesses have been attempting to mitigate since.

For a business to take on such costs would be catastrophic for most small businesses. The first thing you must determine is if your business is actually required to carry it. Some businesses are not. Partnerships and entrepreneurial sole proprietors are not required to have it in place and neither are those companies whose employees are paid strictly via commissions. However, because of liability issues, most of your clients will probably want you to carry it.

However, even if you fall into a category such as those, it does not mean you are not liable for injuries happening to your employees while they are on the job. Even though Texas and New Jersey do not mandate worker’s compensation, a business would be rather foolish to leave that enormous risk just hanging out there poised to destroy the company.

With so much to worry about in terms of risk, the small business owner and entrepreneur would do well to eliminate, or minimize, as many risks as they can. Again, your insurance advisor should be an integral part of any business team so that such risks can be understood and planned for.