A growing portion of workers' compensation claims, however, result from mental or emotional stress. Workers' comp coverage of a partner or of an officer of a small corporation usually isn't required but can be obtained if you choose. Each state has a law setting out what an employer must do to provide for workers' compensation benefits. Sometimes an employer can self-insure. Usually, that isn't practical for small businesses because they can't afford the type of cash reserve required by state law.
Most small businesses buy insurance through a state fund or from a private insurance carrier.
Insurance rates are based on the industry and occupation, as well as the size of the payroll. Although workers' compensation laws cover virtually all injury claims by an employee against an employer, in a few instances employees can still sue an employer for pain and suffering resulting from a work-related injury. For example, in some states, an employer whose gross negligence or intentional conduct caused an injury can be sued. Workers' compensation insurance is required only for employees not for independent contractors. That's fine as long as you correctly label people as independent contractors rather than employees.