While workers’ compensation and health insurance have many similarities, there are key differences between them. And to protect yourself, your workers and your business, you might need a combination of both.
Jump ahead to learn:
What is Workers’ Compensation vs. health insurance?
Workers’ compensation insurance is only for work-related illnesses and injuries. It can provide financial help with things like medical bills, short-term disability and permanent disability impairment to employees when they cannot work because of an injury or illness.
It’s not the same as traditional health insurance for you or your employee. And a workers’ comp claim will not typically cover your monthly bill for health insurance.
Your personal health insurance may help cover expenses if you get sick or injured, but it won’t always cover a workplace injury.
As a sole proprietor, it can be hard to justify paying for both workers’ compensation and health insurance premiums since you don’t have any employees. But you might need to have both types of insurance to maximize your coverage.
The main difference of health insurance vs. workers’ comp insurance is:
- Workers’ compensation is specifically for injured employees who suffer a workplace or illness on the job.
- Health insurance is for injuries or illnesses that occur outside of work and preventative care.
WHAT’S THE DIFFERENCE BETWEEN WORKERS’ COMP AND HEALTH INSURANCE?
| Workers’ Comp insurance | Private health insurance |
| Required in most states for business owners | Required in some states |
| Premium is paid by the employer | Premium can be paid by the employer, the employee, or a combination of them both |
| Helps covers medical treatment for a work-related injury or illness | Helps covers medical bills for any covered illness or injury |
| X | Can cover medication and preventative care |
| Can cover short-term or long-term disability benefits for temporary or permanent impairment | X |
| Can include death benefits (survivor benefits) to help support worker families | X |
| Can include benefits for job retraining for injured workers that can no longer do their job | X |
| Can include Employers Liability coverage to help protect your business if an employee files a lawsuit against you | X |
Why business owners choose Workers’ Compensation benefits
Several reasons make workers’ compensation coverage a good choice for sole proprietors or small business owners.
1. It’s required by law
Most states require business owners to carry workers’ compensation insurance if they have employees, but the rules vary. Be sure to check the state workers’ comp law requirements where you do business to make sure your business is in compliance.
Not carrying coverage when it’s required by state law can leave you open to serious fines and legal action from your employees.
2. It can help cover costs if there’s an accident or illness
Even if workers’ comp coverage is not a requirement for your business, it may be a good idea for business owners to have to help them pay the costs if a worker gets sick or injured on the job. These costs can add up quickly from:
- Medical costs for emergency or ongoing treatment.
- Reimbursement of lost wages during recovery, usually two-thirds of a worker’s average weekly wage.
- Employee lawsuits if they take legal action.
Without a workers’ comp policy, you or your business can be held responsible for covering these expenses on your own.
3. It provides important financial protection for employees
Your employees are an important part of your business success. If your worker has a covered work accident, workers’ comp can help them get through it quickly.
In the event of an injury at work or a job-related illness, the employer usually files a claim on their worker’s behalf with the insurance company within 24 hours of learning about the incident.
Benefits for workers’ comp, such as help with medical care or medical expenses, depend on your location and the type of work injury you’ve endured.
Workers can also get support for life in the event of a permanent injury, and even death benefits for their dependents should their work-related illness or injury become fatal.
> Learn more about how to file a workers’ comp claim.
Why business owners choose health insurance benefits
Health insurance helps cover medications, preventative care and personal illnesses or injuries that occur outside of work. For example, if you get sick with pneumonia, your personal health insurance can help cover the cost of doctor’s appointments, medicine or even a hospital stay.
Unlike workers’ compensation, health insurance won’t typically provide coverage for lost wages if you have to miss work because you are sick or recovering from an injury. Healthcare also won’t cover costs associated with disability or pay survivor benefits to families of deceased employees.
Note that NEXT does not sell health insurance.
Who pays your health insurance while on Workers’ Compensation?
It depends on your state regulations and how long your employee will be out of work.
If your employee is out for fewer than three months, and meets the qualifications in the Family and Medical Leave Act (FMLA), their health insurance remains protected. For those out longer than three months, Consolidated Omnibus Budget Reconciliation Act (COBRA) is another option. However, it requires employees to maintain that coverage.
It’s important to know that employers typically pay the entire cost of workers’ comp coverage.
In most states, business owners can share the cost of healthcare insurance with employees, pay for all expenses or not offer coverage at all.
How NEXT helps protect small businesses
NEXT’s small business insurance options are convenient and affordable.
We have customized insurance tailored to your business. If you’re not sure whether commercial property insurance or a BOP are right for you, we’re here to help.
Start an instant quote, answer a few questions and choose your coverage. You can do everything 100% online in about 10 minutes and get an immediate certificate of insurance.
Take a look at some helpful blog posts
Why small businesses need more than one business insurance policy
What is employers liability insurance?
Learn how this workers’ comp insurance coverage can help shield your business from some lawsuits.
Do sole proprietors need Workers’ Comp insurance?
Learn if there’s a sole proprietorship workers’ comp exemption — and if help with medical costs and lost wages should be ignored.
* To the extent permitted by law, applicants are individually underwritten, not all applicants may qualify. Individual rates and savings vary and are subject to change. Discounts and savings are available where state laws and regulations allow, and may vary by state. Certain discounts apply to specific coverages only.