This insurance covers employees in case of work-related accidents. Most states require you to have workers' compensation insurance for any employees, even part-timers and each state has a different set of rules for what a business needs to cover. Some states only require workers' comp insurance for companies with three or more employees.

To keep the cost of your workers' compensation as low as possible, be sure your employees are classified properly. If you do not inquire about this, all your workers may be lumped into the highest - and most expensive - category of coverage. This insurance protects the employer from being sued by the employee due to injury and the employer pays into a system that provides the injured employee the amount required to cover medical bills and other expenses. Some states also require you to purchase disability insurance that covers employees in case of any accident regardless of where it happens.

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