Understanding Workers' Compensation Insurance in California

March 2023
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Are you a California business owner with employees? If so, you may have questions about workers' compensation insurance. Workers' compensation is mandatory in California and is designed to cover the cost of employee work-related injuries or illnesses.

Understanding Workers' Compensation Insurance

How does workers' comp work? It provides benefits such as medical care, temporary disability benefits, permanent disability benefits, supplemental job displacement benefits, and death benefits.

Not only does it protect your employees, but it also protects you as the employer from legal penalties for not carrying it.

What are the penalties for failing to have workers' comp insurance?

Failing to have workers' compensation coverage in California is a criminal offense, punishable by a fine of not less than $10,000 and/or imprisonment in the county jail for up to one year.

Additionally, the state issues penalties of up to $100,000 against illegally uninsured employers.

It's important to note that workers' compensation insurance is a "no-fault" system, meaning it covers the cost of work-related injuries regardless of who was at fault. The Division of Workers' Compensation (DWC), which is part of the Department of Industrial Relations, oversees the workers' compensation system in California and sets and enforces regulations.

Workers' comp costs

What does workers' comp insurance cost? It depends on factors such as payroll, location, number of employees, industry, and claims history.

The estimated average employer rate in California was $1.45 per $100 in covered payroll. However, some industries have much higher workers' comp rates.

Generally speaking, the more high-risk a job, the higher the comp rate will be. Some of the highest workers' comp rates in California cover high-risk workers such as:

  • Police officers
  • Fire fighters
  • Construction workers/ contractors
  • Lumberjacks
  • Construction equipment operators
  • Telecommunication repair workers

What if you don't have employees?

Generally speaking, workers' compensation insurance is only required if you have one or more employees. However, if you are a contractor or hire construction workers, it's important to note this exception has been changed in CA.

Beginning in 2023, construction workers must carry workers' compensation insurance, even if they do not have any employees. This new law is being rolled out in two phases, with high-priority sectors rolling out first and additional class codes following by 2026.

Learn more about the new workers' comp law affecting California contractors.

Do Freelancers Need Workers' Comp?

Now, you might be wondering if freelancers need workers' comp insurance. The short answer is that it's not required, but it's a good idea to consider purchasing it anyway. If you're injured on the job, this policy can help cover your medical expenses and lost wages while you recover. Your personal health insurance provider may deny a claim related to work, which could leave you stuck with the bills.

More Facts About Workers' Compensation Insurance in CA

  • Workers' compensation insurance is a no-fault system, which means that employees are entitled to benefits regardless of who was at fault for the injury or illness. This helps protect employees from financial hardship and ensures that they receive the care they need to recover from their injuries.
  • While workers' compensation insurance is mandatory for most employers in California, there are some exceptions. For example, certain types of businesses, such as sole proprietors and partnerships, may be exempt from the requirement to carry workers' compensation insurance. However, even if you are not required to carry workers' compensation insurance, it may still be a good idea to purchase it to protect yourself and your employees.
  • California employers are required to post a notice informing employees of their rights and responsibilities under the state's workers' compensation system.
  • In addition to the basic benefits provided by workers' compensation insurance, such as medical care and disability benefits, some employers may be required to provide additional benefits, such as family and medical leave, disability leave, and pregnancy disability leave. These benefits are separate from workers' compensation insurance but may be required under state or federal law.
  • To ensure that you are properly protected, it's important to work with a licensed insurance provider who can help you understand your insurance needs and create a comprehensive insurance plan that adequately covers your specific risks and liabilities.

It's also important to note that workers' compensation insurance is not the only type of insurance that employers may need to carry. Depending on their business's nature, they may also need liability insurance, property insurance, or other types of coverage. A licensed insurance provider can help create a comprehensive insurance plan that covers their specific risks and liabilities.

Remember, workers' compensation insurance is not only required by law in California, but it's also an essential part of protecting your employees and your business. Don't wait until it's too late -- request a quote for workers' comp insurance today.