Workers’ compensation insurance is a type of insurance that offers wage and medical benefits to workers that get hurt or become ill while at work. Each state mandates the type of benefits someone can receive.
What is Covered?
There are many ways a workers comp insurance policy can protect a business and its employees. It will cover:
- Medical expenses to treat ill or injured employees
- Missed wages for ill or injured workers needing time off to recover
- Vocation rehabilitation for workers needing additional care to help get them working again
- Death benefits for work-related deaths to cover things like funeral costs
The concept of workers’ compensation is regarded as social insurance, as it allows business owners to protect themselves from civil suits filed by their employees who get injured on the job. Although the benefits offered by workers’ compensation insurance can vary, it is typically purchased by businesses. In some states, the insurance is also backed by public funds.
How Are Rates Determined?
The rates for different types of businesses are determined by the previous five years of loss costs for all companies in the same state. This method ensures that the rates are charged according to the experience of the business. The economic factors of each state are then used to determine the rate for the different classes of businesses.
Through a system known as experience rating, business owners can modify the class rates of their workers’ compensation insurance policies based on the past loss history of their company. This allows them to control their premium costs. Safe businesses are often rewarded with lower rates, while risky establishments are often penalized.
Who Needs to Offer Workers’ Comp Insurance?
In most states, businesses with non-owners are required to provide workers’ compensation insurance to their employees. Without workers’ compensation insurance, businesses can face various penalties and legal repercussions. These include the loss of their license to operate in the state, as well as the payment of claims out of pocket.
How Does the Claims Process Work?
The injured parties must first visit a healthcare professional to get medical reports. Once these are done, they can then start the claims process with the help of insurance companies. Employees must also provide all of the necessary paperwork to support their claims.
Laws for Workers’ Compensation By State
The laws for workers’ compensation vary depending on the state. The premium amounts and benefits change according to the state’s economy and the risks faced by businesses. Each state will have the ability to choose who handles and sells the policies. This can be private insurance companies, state-run agencies, or the state itself.
In some states, disabled workers are covered by secondary injury funds, which can provide financial support to injured workers. This makes it easier for businesses to hire individuals who have previously been injured.
For instance, if a shipping yard hires a former nurse who has a workers’ comp claim, then a second injury fund can help cover the costs associated with the worker’s previous injury. This can help prevent the worker from re-injuring himself or herself.
Types of Injuries Covered
If an employee gets injured on the job or while they’re acting on your behalf, then workers’ comp can help. For instance, if an accident happened while they were driving to deliver goods to your customers, then the policy can help pay for their medical expenses. Work-related accidents also covered can include:
- Violence
- Natural disasters
- Terrorism
About 30% of the cases that are covered by workers’ comp involve strains and sprains. These usually happen when an individual is lifting something heavy. Usually, these injuries take around a week to heal. Besides being able to cover workplace injuries, workers’ comp also provides coverage for illnesses that employees might experience at work.
Types of Injuries Not Covered
Unfortunately, workers’ comp policies do not usually cover certain types of illnesses and injuries that happen due to an employee’s actions. For instance, if an employee gets injured in a fight, then the policy might not help cover the costs of injuries associated with it. Also, if an employee sues your company, then the policy might not provide coverage for the legal fees that the employee might incur.
Final Thoughts
Business owners need to take precautions to protect themselves. Buying workers’ compensation will provide benefits to your employees if they get sick or injured. It will also protect you in the event an employee tries to sue you for work-related injuries.
