Small companies are the backbone of the California economy. According to data from the Small Business Administration (SBA), there are 4.2 million small businesses actively operating in California. Under state law (Labor Code § 3700), all small businesses are required to provide no-fault workers’ compensation coverage

As a small business owner or operator, you may be wondering: How do I obtain workers’ compensation insurance coverage for my staff? In this blog post, our Sacramento workers’ compensation defense attorney highlights the three main ways that small businesses can obtain workers’ compensation insurance coverage in California.

Three Ways that Small Businesses Can Obtain Workers’ Compensation Coverage in California

  • Purchase Private Workers’ Compensation Insurance

Private workers’ compensation insurance offers a straightforward way for small businesses to secure coverage. It is an approach that involves acquiring a policy from a privately held insurance company. A small business can seek the assistance of an insurance broker to identify the most suitable plan. It is always best to look for a coverage plan that meets their specific needs and budgetary constraints. Notably, an employer’s workers’ compensation insurance costs vary widely based on the nature of your business, your past claim history, and the overall safety record of your industry.

  • Purchase Workers’ Compensation Coverage from the California State Fund

Entering into the California state workers’ compensation fund may be a sensible option for a small business. The California State Compensation Insurance Fund serves as a public enterprise fund that offers a safety net for businesses unable to obtain coverage elsewhere. It exists to ensure that all California employers can have access to workers’ compensation insurance. The State Fund could be an excellent choice for many different small businesses—particularly those in high-risk industries or those with less-than-stellar safety records, who otherwise might face challenges when trying to secure private insurance. However, while the State Fund can provide more certainty of coverage, it can sometimes also come at a higher price than a private insurer would charge.

  • Self-Insure (Allowed—Rarely a Viable Option for Small Businesses)

In California, employers also have the right to self-insure. While legally permissible, it is rarely a viable option for small businesses. Why? The reason is that this route requires a business to essentially become its own insurance company. A business must demonstrate substantial financial resources to qualify for self-insurance because it will be responsible for covering all costs associated with workers’ compensation claims.

Among other things, this includes medical expenses, rehabilitation costs, and lost wages. Beyond that, businesses must show they can manage claims effectively, meaning they need to have administrative capability or hire a third-party administrator. Given the financial and administrative burdens associated with self-insurance, it is typically a path pursued only by larger corporations. Still, if a small business has sufficient resources and expertise, self-insurance can offer increased control over how claims are handled.

Contact Our Sacramento, CA Workers’ Compensation Defense Lawyer Today

At Yrulegui & Roberts, we have the skills, experience, and dedication to represent small businesses. If you have any specific questions about navigating workers’ compensation regulations as a small business, we are here to help. Contact us today for a fully confidential, comprehensive consultation.