Workers Compensation insurance or worker comp gives your employees benefits if they get a work-related injury or illness. This type of insurance is required in most states. Employers are responsible for buying and providing it to their employees.
Workers’ compensation insurance benefits usually help employees by covering:
· Medical treatments
· Disability benefits
· Vocational rehabilitation
· Death and funeral services
Workers’ Compensation, commonly referred to as “workers comp,” is a government-mandated program that provides benefits to workers who become injured or ill on the job or as a result of the job. It is effectively a disability insurance program for workers, providing cash benefits, healthcare benefits, or both to workers who suffer injury or illness due to their jobs.
In the U.S., workers’ Compensation is handled primarily by the individual states. The required benefits vary greatly state by state.
Texas is the only state that does not require employers to maintain workers’ compensation insurance.
Each state is in charge of its own workers’ compensation program. This means state laws for workers’ comp can be different depending on the location of your business.
Each state sets its premium amounts and benefits based on its economy and the risks its businesses face. For example, Alaska has one of the highest average premiums in the country because they have so many lumberjacking companies, and lumberjacking is a high-risk occupation.
Your state will also decide who sells and handles workers’ comp policies. This can be:
Private insurance companies
The state itself
Some states also have second injury funds that help cover disabled workers if they’re injured on the job again. This makes it easier for employers to hire workers who have been injured before.
For example, you run a shipping yard and hire a former nurse who hurt his back on the job years ago and had a workers’ comp claim. Their injury might make him more susceptible to reinjury, and if that happens, a secondary injury fund can help pay the costs. Without this fund, businesses may be hesitant to hire a worker like this.
Workers’ Compensation helps cover costs related to work injuries. Coverage includes everything from ambulance rides to medication and physical therapy.
Workers’ Compensation provides coverage for:
Compensation for fatal injuries
Missed wages during recovery
Lawsuits related to work injuries
When an accident happens at a workplace, workers’ compensation insurance covers the cost of immediate care, such as an ambulance ride or an emergency room visit. It also helps pay for surgical procedures, medications, hospital stays, and other medical bills. Ongoing care, such as continuing medication and physical rehabilitation, is also covered.
Example: A painter falls off a ladder while working on a ceiling and breaks a leg. Workers’ compensation insurance pays for the ambulance ride to the hospital, surgery, medications, and physical rehabilitation.
Missed wages during recovery
A serious injury can prevent an employee from returning to work for days, weeks, or even months. Workers’ Compensation often pays for part of the wages lost while an employee is recovering from a workplace injury or occupational illness.
Example: An HVAC installer accidentally lowers an air conditioner onto his foot and breaks several bones. The installer has to stay off his feet for a month, which prevents him from working. The installation company’s workers’ comp policy pays part of the wages that would have been earned during the month of missed work.
Compensation for fatal injuries
When a work-related incident is fatal, workers’ Compensation pays death benefits that cover funeral expenses and help support the deceased individual’s family.
Example: An electrician accidentally touches a live wire, goes into cardiac arrest, and dies. The electrical company’s workers’ comp policy covers the cost of the funeral and burial. It also provides financial support to the electrician’s spouse and children.
Lawsuits related to work injuries
Workers’ compensation insurance typically includes employer’s liability insurance. This policy protects the employer from a lawsuit claiming a worker was injured by the employer’s negligence. If an employee sues, it can help pay for:
Settlements or judgments
Example: A chef in a restaurant suffers third-degree burns while trying to put out a grease fire. The chef blames the restaurant for failing to provide a fire extinguisher and adequate safety training. The case goes to court; the restaurant’s workers’ comp policy pays for the cost of hiring a lawyer and the eventual settlement.
Workers’ Compensation insurance covers most incidents that occur in the course and scope of employment or with expressed permission from the employer outside of the workplace. Ultimately, workplace incidents that involve employee injuries have to be determined on a case-by-case basis. However, there are situations where injured employee claims would not be covered. Examples of these include:
Driving to/from work: If an employee is injured on their commute to or from work, this is not considered within the course of their employment and would therefore not be covered unless the employee has permission.
Intoxication/intentional act: If an employee is under the influence of an illegal substance and intoxicated, and the intoxication is the sole cause of his or her injury, the injury is generally not covered.
Horseplay: Horseplay in the workplace, in general, does not further the course of business, so a resulting injury would not be covered. However, there is an exception to that rule if an employee gets harmed during the incident but wasn’t directly involved in the horseplay.
Intentional acts: When a worker intentionally causes their workplace injuries or illnesses, they are not covered under a Workers’ Comp insurance policy.
Illegal activities: Employee injuries due to illegal activities at the worksite are not covered by an organization’s Workers’ Compensation insurance policy.
Policy violations: Workers’ comp does not cover employees who are injured while violating company policies, procedures, and protocols.
Terminated employees: Workers who have been laid off or terminated from a job will no longer be covered under workers’ comp insurance unless the injury predated the employee termination.
For almost all businesses in the United States, yes. Workers’ compensation insurance usually isn’t optional.
While workers’ comp laws vary by state, small businesses typically need a policy in place as soon as they hire their first employee.
Even when not required by law, this policy provides important protection against medical expenses and employee lawsuits related to workplace injuries.
You can rely on workers’ comp if you or an employee needs medical care or time off due to a workplace injury – or if an injured employee sues you for failing to prevent an accident.
If you don’t carry workers’ comp, your business will be responsible for any medical bills and legal fees. And most states levy costly penalties for noncompliance.
Small businesses find workers’ comp essential for three reasons:
Most states require workers’ comp coverage.
It covers medical expenses and partial lost wages due to a work injury.
Most policies also cover the cost of employee lawsuits related to a work injury.
Key factors affecting workers’ compensation premiums are your industry, payroll, and claims history. Your state’s worker compensation laws will impact your worker’s compensation premium as well.
Industry: When it comes to workers comp, businesses like construction are riskier for claims and thus have higher premiums.
Payroll: A company’s annual payroll is used to calculate its annual worker’s compensation insurance cost. Because of this, you’ll need to know your annual payroll figures when shopping for workers’ compensation insurance.
Claims history: If your business has had workers’ compensation claims in the past, you’ll see an increase in your workers’ compensation costs. Both the number of claims and the seriousness of the claims will be considered when determining the workers’ comp rate for your business.
State laws: The location of your company has an impact on premiums. Each state has its own state laws regarding worker’s Compensation, and these laws impact insurance premiums.
Workers comp insurance premiums are charged based on every $100 of your company’s payroll.
The Hartford estimates that workers comp insurance costs about $1 for every $100 in payroll.
But there can be significant variations depending on your workers’ classifications. For example, according to Cerity:
In California, the cost of workers comp for every $100 in payroll is 40 cents for low-risk workers (like clerical workers) and $33.57 for a high-risk labor job.
In Florida, the average is 26 cents per $100 in payroll for a low-risk job and $19.40 for a high-risk job.
In New York, the average is 7 cents per $100 payroll for low risk and $29.93 per $100 payroll for high risk.
Employer’s liability insurance is part of workers’ compensation insurance. Workers’ compensation insurance policies usually have two parts:
Part 1: Workers’ compensation insurance. Workers’ comp pays for medical expenses and partial lost wages from work-related injuries and illnesses.
Part 2: Employer’s liability insurance. This coverage provides the business owner protection if your company is blamed for an employee injury or illness.
Employer’s liability insurance covers legal defense costs when an employee blames your business’s negligence for their injury or illness. Those costs could include hiring a lawyer, court fees, and paying a settlement or judgment.
Accidents occurring on the job should be covered by workers’ compensation insurance. You can get a free online quote for workers’ comp insurance in every state that allows private insurers to offer coverage. CompareAquote.com can help you get the coverage you need to help protect your business and employees. And our workers’ comp program gives your employees access to unique features that can help them return to work quicker.
Insurers don’t typically offer different types of workers’ compensation policies. The state fund workers’ comp plan or workers’ comp plan you can get from an insurance company is generally standard in the industry. Although some companies offer endorsements that can extend coverage. Additionally, your benefits and coverage requirements can vary depending on the state you’re in.