What is Workers Compensation Insurance?
Workers compensation insurance, commonly known as workers’ comp, is insurance that covers medical expenses and a portion of lost wages for employees who become injured or ill on the job.The coverage is mandated by each state and the wage and medical benefits vary by state. Workers’ compensation is considered a social insurance because it relies on a social contract between management and labor, wherein exchange for purchasing workers’ compensation insurance, business owners are protected from civil suits from their workers who become injured on the job. Yet each party benefits has limitations.
Workers’ compensation provides a safety net for you and your employees after a workplace injury. It can help cover expenses for medical treatment, lost wages, and other costs. Workers’ compensation insurance is purchased by businesses, and is underwritten by insurance companies and, in some states, underwritten by publicly supported state funds.
How Does Workers Compensation Insurance Work?
Every state in United States of America has its own unique set of workers’ compensation laws that employers must follow. These regulations help ensure that employers provide coverage for the cost of work-related injuries or occupational diseases, regardless of employee negligence.
An employee can only receive benefits if their injury or illness relates to their job duties or employment. Workers’ comp insurance could cover injuries caused by lifting heavy equipment, slipping on a wet or oily surface, or sustaining injury due to fires or explosions.
If an employee isn’t acting within the scope of their employment and becomes injured, such as playing football with friends on a day off, workers’ compensation insurance won’t cover them.
How Is The Cost of Workers Compensation Insurance Determined?
Similar businesses in each state, that exhibit comparable workplace injury patterns and costs, are grouped into “classes.” Rates are determined for each class based on the prior five years of loss costs for all businesses within that class. This provides an equitable system where rates are charged commensurate with the actual loss experience of the class of business. Economic factors for each state are then overlaid onto this data to determine the rate for each class in a given state.
A system called “experience rating” allows for modification of the class rates based on the loss history of an individual business. This system provides business owners a significant amount of control over the cost of their workers’ compensation premium – safe businesses are rewarded with lower premiums and unsafe businesses are penalized with higher premiums.
How Much Is Workers Compensation Insurance?
- Payroll
- Industry
- Employees' type of work
- Claims history
Who Needs Workers Compensation Insurance?
Workers’ compensation insurance is required by law in almost every state. Some worker exemptions exist, so you’ll want to check with your state to find out if coverage is mandatory for your business.
Choosing to forgo workers’ comp coverage puts your business at high financial risk. Not only can you face a lawsuit for workplace injuries, but you’ll likely be fined for breaking the law.
Keep in mind, workers’ comp insurance protects not only your employees, but your small business too. For example, if your insurance is compliant with state law, an employee who receives benefits can’t sue you for their injuries or lost wages.
They can, however, sue you for things that aren’t covered under the workers’ comp portion of your policy. Employer’s liability insurance is also included in your policy to pay for court costs and legal fees if you’re involved in such a lawsuit.
How Workers Compensation Insurance Claims Work
The injured parties must visit a healthcare professional immediately so a doctor can provide medical reports to support any claims. Employees can then begin the claims filing process with Nationwide, being sure to include any state-mandated paperwork or forms. Once these claims are approved, the recipient will receive their compensation payments and can return to work when they feel they are ready.
Answers To Frequently Asked Questions About Workers Compensation Insurance For Employers
In addition to injuries that occur outside of work, injuries that occur intentionally, while commuting to and from work, or due to intoxication or substance abuse wouldn’t be covered by workers’ compensation.
It varies based on where your business operates. For example, certain types of employees, such as seasonal workers, may not be covered by workers’ compensation in some states. You can contact 1-888-806-9598 and they’ll help you answer any state-specific questions you have about your coverage.
Not usually. While workers compensation laws vary from state-to-state, most states don’t require sole proprietors to carry workers’ comp.
Depending on the state, contractors and volunteers can be entitled to workers’ compensation benefits if they’re injured or become ill on the job. Our in-house agency can help answer any state-specific workers’ compensation questions you have. You can call at 1-888-806-9598.
