3 Insurance Questions to Ask Before Hiring Employees
Hiring your first employee? Congratulations! Becoming an employer is a significant step, one worth celebrating.
As with most major milestones, it also presents new challenges. “When bringing in employees, you start to change the risk profile of the business,” says Scott Harris, Assistant Vice President, Product Development at The Hartford, an insurance provider that specializes in small business insurance.
With that in mind, here are three important questions you should ask before making the leap from a solo small business owner to employer.
1. What are your legal requirements?
When it comes to starting and growing a business, you typically have a good idea of what equipment, supplies, and technology you will need. What often isn’t considered, at least right away, are the types of insurance you will need and how much coverage is needed to best protect your growing business.
“First and foremost, a business owner should understand the statutory requirements of the state they operate in,” Harris says. As you start to take on exposure to more types of risks, it is important to have the right coverage in place to meet the needs of your business. Having the right small business insurance can help protect you so that you are free to you focus on moving your business forward.
2. What type of worker’s compensation do you want to offer?
Worker’s compensation helps cover wages and medical costs should an employee get injured or sick. Most small businesses with employees are required to provide it, although specifications vary by location. Some states, for example, require that companies provide worker’s compensation for part-time as well as full-time employees.
Even for situations in which worker’s compensation isn’t required, you may still elect to provide coverage. “If there is an injury in the workplace, you could experience a financial set back,” Harris says. Worker’s compensation can help keep your business protected in the event that an employee slips and falls or otherwise injures themselves. For small businesses, there are options to help you manage the costs of this type of coverage. Pay-as-you-go worker’s compensation insurance – which bases premium payments on actual payroll, helps manage cash flow and eliminates up-front costs and surprise audits.
3. What is your business’ risk profile, and how should it shape your coverage beyond worker’s compensation?
Before hiring employees, Harris recommends small business owners have at least a general understanding of the specific risk factors that could have an impact on their business going forward.
Insurance providers can be a good resource to help you better understand and prepare for risks your business may be exposed to. “It comes down to asking questions,” Harris says. For example, if operations or revenue depend on the skills or expertise of a single employee, you might want to consider business income protection, which covers financial losses should that person leave unexpectedly.
Other common policies include:
Employment practices liability, which covers employment-related claims such as harassment, discrimination, or wrongful termination lawsuits. “As soon as you bring employees into the mix, you automatically take on those exposures,” Harris says. There are also policies for small businesses that cover third-party liability exposure, should a customer or vendor file a similar claim.
Employee benefits liability, which protects against an employer’s mishandling of its employee benefit programs, such as worker’s compensation, health insurance, and retirement plans. “
Sometimes mistakes happen, and you will want to be protected if there is an error or omission that might occur when administering a benefit plan,” Harris says. For instance, the policy could be triggered if funds in your retirement benefits plan are bungled—fraud, perhaps, or simply mismanagement—prompting a lawsuit.
Property and casualty insurance, which offers a broad range of product solutions to protect against situations such as an employee damaging a customer’s property or stealing from the company.
For companies with a small, tight-knit team, planning for worst-case scenarios might not feel like a necessary task at first. However, having the right protection in place allows you to focus on what truly matters: hiring the best people to help grow your business.
If you’re thinking about hiring an employee, click here to learn how The Hartford can protect your business from unforeseen circumstances and financial loss.