Workers’ compensation is one of those topics that many business owners think they understand—until a claim happens. You may hear advice from other owners, read quick summaries online, or rely on assumptions based on how your business operates today. These shortcuts often lead to myths that feel logical but don’t hold up when laws, claims, and real expenses come into play. When you base decisions on misinformation, you risk fines, uncovered claims, and legal trouble that can drain your time and resources. Workers’ compensation laws vary by state and change over time, which adds to the confusion. Knowing the most common myths helps you replace guesswork with clarity and make choices that support your business instead of putting it at risk.

Myth One: You Don’t Need Coverage Because Your Business Is Small

One of the most expensive misconceptions is that workers’ compensation applies only to large companies. Even if you have just one employee, you may still be required to carry coverage. Size doesn’t eliminate risk. A single workplace injury can lead to medical bills, lost wages, and legal claims that quickly add up. Many states impose penalties for failing to carry workers’ compensation, regardless of how small your operation is. You might assume that a close-knit team or low-risk work environment reduces the need for coverage, but accidents don’t check employee counts before they happen. Having the right policy in place helps you stay compliant and prepared, even when your business is just getting started or operating with a lean team.

Myth Two: Independent Contractors Are Always Excluded

It’s common to believe that labeling someone as an independent contractor automatically removes your responsibility for workers’ compensation. In reality, classification rules are strict, and misclassification is a frequent issue for businesses. If a worker functions like an employee—follows your schedule, uses your tools, or works primarily for you—you could still be held responsible if they’re injured. When a claim arises, state agencies look at the working relationship, not just the title you assigned. Misclassification can result in back premiums, fines, and uncovered claims. Understanding how workers are classified and how that affects your insurance is essential if your business relies on contract labor, seasonal help, or project-based workers.

Myth Three: Workers’ Compensation Only Covers On-the-Job Accidents

Many business owners think workers’ compensation applies only to sudden accidents, such as slips or falls at work. In reality, coverage often extends to repetitive stress injuries, occupational illnesses, and conditions that develop over time due to job duties. Back problems, carpal tunnel syndrome, and exposure-related illnesses can all fall under workers’ compensation if they are connected to the work you provide. These claims can be just as costly as a single accident, sometimes more so. When you underestimate the range of situations that workers’ compensation can address, you may also underestimate your exposure. Knowing what types of claims can arise helps you plan better and avoid surprises that affect your operations and finances.

Clearing Up the Myths to Protect Your Business Long-Term

Believing workers’ compensation myths can lead to gaps that affect your business far beyond a single claim. The right approach starts with understanding how coverage applies to your employees, your work environment, and your responsibilities as an employer. When your policy aligns with how your business actually runs, you reduce the risk of penalties, lawsuits, and unexpected expenses. At Koda Insurance Services, the goal is to help you move past assumptions and into informed decisions that support your long-term stability. If you want to make sure your business is properly protected from lawsuits and costly workers’ compensation issues, call (619) 558-5047 or fill out the online form to schedule a quick policy review and get clear answers tailored to your business.