Whether you run a pizza shop, a marketing agency, or a construction site, the truth remains that your employees can get hurt.
Every 7 seconds, an American employee is injured on the job.
Workers’ compensation insurance provides benefits to any employee who gets sick or hurt on the job. And in exchange for acquiring workers’ comp, employers are protected from civil suits from employees who fall ill or become injured at work.
In 2015, benefit payments under workers’ compensation programs were over $61 billion. Without insurance, a business owner could find themselves in a precarious and expensive situation should even just 1 worker get hurt.
Are you unsure as to whether or not you need workers’ compensation insurance for your business? Keep reading to learn all about when you need to protect your employees.
What Is Workers’ Compensation Insurance?
Worker’s compensation insurance provides wages and medical benefits to employees who become ill or are injured at work.
The benefits vary from state to state.
It’s considered social insurance as it relies on a social contract between labor and management. In exchange for purchasing workers’ compensation insurance, business owners are protected from lawsuits.
In some states, the insurance is underwritten by publicly supported state funds. In most states, it is underwritten by insurance companies.
Workers’ Compensation Insurance Definition
Workers’ compensation insurance provides lost wages, medical expenses, and rehabilitation costs to employees who become ill or are injured “in the course and scope” of their job.
Workers’ compensation insurance also pays death benefits to the families of employees who are killed on the job.
Is Workers’ Compensation Insurance Required?
Workers’ compensation laws vary from state to state.
In California, for example, all employers, even employers with only 1 employee, must carry coverage. That law includes every work situation, including corporate directors and officers.
If you’re an out-of-state employer, you might need workers’ comp coverage for any employees you have working in California.
If a corporation is owned in full by the directors and officers operating it, then they have the option to be excluded from the coverage. Sole proprietors without employees can also opt-out of coverage.
Every state has its laws, which is why it’s essential to check your state’s rules and regulations.
Employers’ Liability Insurance vs. Workers’ Compensation
There is one primary difference between employers’ liability insurance and workers’ compensation. Employers’ liability insurance provides more protection.
Workers’ compensation covers accidents that can’t be prevented. Employers’ liability insurance covers a broader range of claims that could come back against the employer.
Employers’ liability insurance provides additional protection for the employer. This is helpful when a worker isn’t covered by workers’ compensation or if they decide to sue their employer.
Most companies purchase employers’ liability insurance when they buy workers’ compensation insurance.
What Does Workers’ Comp Cover?
Workers’ comp comes into play when one of your employees gets injured on the job. Coverage includes the duties of the role that don’t occur at the primary worksite.
For example, if an employee gets injured while making a delivery for their employer, workers’ comp will still help pay their medical costs.
In addition to coverage for injuries, workers’ comp also covers illnesses that occur as a result of the job. For example, if an employee comes into contact with harsh chemicals and gets sick, workers’ comp will help to cover their medical costs, etc.
Workers’ comp also provides disability payments while your employee is unable to work.
Here are some circumstances in which workers’ comp will not necessarily cover an employee:
- The injury happens because of a fight your employee caused
- The injury was intentional
- The damage is emotional and not physical
- The injury takes place during an employee’s commute
- The employee was injured while intoxicated
Even if workers’ comp doesn’t cover your employees, they could still opt to press charges against you on their own accord. That’s why it’s essential to have liability insurance too.
How Does Workers’ Comp Work?
When an employee is injured or falls ill on the job, it’s their duty to report the incident to their employer immediately. Every state has different reporting rules. If an employee doesn’t make a report before a specified deadline, they could lose their right to benefits.
After an illness or injury gets reported, the employee must visit a healthcare professional. At that visit, the doctor will provide a medical report to file with the employee’s injury claim.
It’s up to the employer to provide the appropriate forms and information about the claims process.
Once an employee files a claim with the employer’s insurance company, they’ll have to adhere to reporting deadlines. They must include any required forms, medical reports, or state-mandated paperwork.
Once the claim gets approved, the employee begins to receive workers’ compensation payments.
Benefits may include coverage for medical expenses and rehabilitation costs. They’ll also include approximately 2/3’s of an employee’s wages while the doctor deems they are unable to work.
How Much Does Worker’s Compensation Insurance Cost?
The cost of workers’ compensation insurance is dependent on a variety of factors, such as:
- Business’ size
- State laws
- Employees’ type of work
- Claims history
According to the National Safety Council, the average cost of a workers’ compensation claim is just over $40,000. This high cost is the reason why most small business owners purchase workers’ compensation, even if it’s not required.
A workers’ compensation premium is a much better deal than having to pay for costs associated with a claim.
Who Is Covered by Workers’ Compensation?
The answer to this question is, it depends. If you’re an independent contractor who gets injured on-site, you may be covered depending on state laws and the company’s plan.
Certain states exempt specific categories of workers from getting workers’ compensation. Some of these positions may include seasonal employees, independent contractors, and agricultural employees.
It’s vital to discuss with your insurance provider your state’s laws and the plan options for your business. You want to make sure that you and your business are protected, no matter what.
Don’t Wait on Workers’ Compensation Insurance
If you’re wondering whether or not you should get workers’ compensation insurance for your business, don’t wait any longer.
The costs of premiums are likely significantly lower than the price of paying for a claim out-of-pocket.
Plus, with coverage, you’ll be able to rest easy knowing that your employees, you, and your business are protected.