Industry research indicates that a substantial number of small and medium-sized businesses don’t have insurance. In fact, reports suggest it could be approximately 75% – though this is debated depending on region and industry data sources.
The point is that there are a lot of businesses out there that have decided, for one reason or another, that it’s not necessary or not practical yet to attain insurance. Ordinarily, this has to do with costs, but what a lot of these businesses don’t realise is that there’s a cost to not having insurance.
Let’s look specifically at workers compensation insurance – on the surface, this could look like a coverage that isn’t immediately relevant to small teams, but actually, if something goes wrong and a worker gets injured or becomes ill on the job, not having insurance like this could be the difference between a manageable financial setback and you having to close your doors.
So why is this the case?
Worker’s Compensation Insurance: Explained
Let’s start by discussing what workers’ comp actually is. This is coverage designed to protect both employers and employees when someone gets injured or becomes ill because of their job. Instead of the employee having to sue the employer to recover costs, workers’ comp provides a structured way to cover medical expenses, lost wages, and rehabilitation costs.
In practical terms, then, it acts as a financial buffer. Let’s say a delivery driver slips while unloading goods – in this scenario, workers’ comp ensures that medical treatment and recovery costs don’t come directly out of the business owner’s pocket. Instead, it’s included in the insurance policy, helping to avoid those costs escalating quickly and becoming unmanageable for the business itself.
This is especially true if the situation escalates into a lawsuit. You might be wondering: why would a worker sue a company if they accidentally slip? And you’re right: oftentimes, it’s not the company’s fault, but as we mentioned previously, because costs can be so steep, it’s become a sort of expectation that the business, not the employee, should pay for it.
Just last year, for instance, workplace lawsuits and enforcement actions against US businesses reached record highs, with more than 1,700 class action lawsuits being settled for a total of $79 billion. Many of these cases will have been down to business negligence, that’s true, but sometimes workplace accidents and incidents can be unavoidable, and so it’s crucial to have insurance in place to cover you.
What’s the Real Cost of Skipping it?
With that $79 billion in mind, the cost of skipping workers’ comp insurance is obviously severe. Whether it’s medical bills or a full legal claim, the financial exposure can build quickly and unpredictably, and what makes it especially risky is that these costs are rarely capped.
Unlike an insurance premium, which is fixed and predictable, liability from an uninsured workplace injury can grow over time depending on the severity of the injury and the length of recovery, and so, in extreme cases, it can force a business to take on debt or even shut down entirely.
That’s why workers’ compensation is often viewed less as an optional expense and more as a foundational part of running a business with employees. It exists to absorb shock – the kind of financial shock that most small companies simply aren’t built to handle on their own.
Even if you only have a few employees in action – let’s say you’re a team of three or four – the risk doesn’t disappear, it just becomes more concentrated. One incident, even in a tiny team, can be all it takes. Indeed, it can even be worse, as there’s no larger workforce to absorb the disruption or costs.
If you’re running a business, then, and you don’t have workers’ comp in place, make sure to put it at the top of your priorities. Any applicable insurance, in fact, will be crucial for moving forward with confidence, so it’s important to do your due diligence and get the kind of policies that work for you.
Is it an expense? Yes. But as we mentioned before, the real cost occurs when you don’t have them in place.
