According to statistics, 2.8 million non-fatal illnesses and injuries were reported on-the-job in 2018. That’s not accounting for the 5,250 deaths that occurred due to injuries suffered while on-the-job in the same year.
Accidents happen. When they occur in the workplace, you need to protect your workers by cushioning them from resulting difficulties. Workers’ compensation insurance helps ensure your employees are financially catered for so they can resume working or find new opportunities.
Keep reading for a straightforward guide that answers the questions, “What is workers compensation and how does it work?”
What’s Workers’ Compensation?
Workers’ compensation is a type of insurance policy you purchase to cover your staff in case they fall sick or get injured while working.
Workers’ comp is a no-fault type of policy. What that means is no matter who causes the accident or injury, the employee will still receive the benefits from the policy.
As such, your employees can rest easy knowing they will be taken care of in case of an injury or illness. On the other hand, you will also rest easy knowing that for that assurance, your staff forfeits the right to sue you.
Must You Purchase Workers’ Compensation?
Most employers across the United States are required to carry workers’ compensation. The only state that doesn’t make this insurance mandatory for employers is Texas.
If you run a federal company and plan to employ contractors on overseas military bases, you won’t be exempt. You may have hold workers’ comp in the form of the Defense Base Act Insurance.
The particulars concerning the rules and regulations surrounding workers’ comp vary with each state. The only exception to this is the federal workers’ comp system, which is governed by federal law.
Some of the areas in which each state will differ in how it administers workers’ comp include:
- Defining excluded injuries
- Defining eligible employees
- The statute of limitations
- The types of injuries covered and the proof necessary to validate a claim
- How an employer can defend themselves against a claim
Therefore, you should ensure you check with your state’s workers’ comp agency for the exact requirements you need to meet.
What Happens If an Employer Has No Workers’ Comp Insurance?
If you don’t have workers’ comp when disaster strikes, you will end up paying out-of-pocket for all costs.
Additionally, you may lose the right to do business in your state. The state will also likely impose hefty fines on you with the worst-case scenario being jail time.
Another potential outcome of not complying with workers’ comp requirements is that your employees can sue you.
Some states run a fund to compensate injured or illegally employed people. If you lack workers’ comp, these state funds will cater to the costs and then come after you for reimbursement.
What Does Workers’ Comp Insurance Cover?
Workers’ comp will only cover injuries and illnesses that arise out of and occur during employment. These injuries don’t necessarily have to happen at the office for them to be valid.
For example, your employee might be running an office errand or traveling for business when they get injured.
Workers’ comp will also seek to help an employee get back to work. In some cases, that might mean helping your employees receive rehabilitation while in others retraining for new positions.
If you’re helping an employee resume work after an injury, some states can help you purchase programs to deploy job modification (which come with these plans and pricing).
With that said, there are certain types of injuries that workers’ comp won’t cover. These inside injuries that occur as an employee is violating company policy or committing a crime.
Any injury your staff suffer while under the influence of alcohol or illegal narcotics also won’t make for a valid claim. The same also applies to injuries that arise due to an employee fighting with another worker.
Are All Employees Eligible for Workers’ Comp?
Not everyone who works for you is eligible for workers’ comp insurance. Any independent contractors you hire won’t be able to claim workers’ comp in case of an injury.
Even in cases where you sign a 1099 tax form as an independent contractor, your eligibility may come into dispute.
When courts are determining the eligibility of an employee for workers’ comp, they look at the degree of control you have over your work. Other pertinent details relating to your relationship with the person you work for do come into play as well.
Furthermore, volunteers are typically not eligible for workers’ comp benefits. However, some states allow organizations to have an option covering their volunteers, while others will offer specific cover for firefighting volunteers.
How Much Will Workers’ Comp Insurance Cost You?
As with any insurance, how much you will incur on workers’ comp depends on the nature of your business, its size, and your industry.
The claims history of your business will also come into play. The safer your firm, then the less you may end up paying and vice versa.
Your underwriter will also scrutinize the overall rate of injuries within your industry alongside the rate of injuries in your state.
In general, the average amount businesses pay for workers’ comp per employee hovers at around 14% of that worker’s total compensation. Reach out to a licensed workers’ comp insurance company to get specific rates for your state.
How Can an Employer Get Workers’ Comp Insurance?
A majority of the states allow you to buy private insurance. However, two U.S. territories and five states will only allow employers to purchase workers’ comp from state-operated funds.
These are Ohio, Wyoming, North Dakota, the U.S. Virgin Islands, Puerto Rico, Washington, and West Virginia.
You can acquire coverage through conventional insurance, pay-as-you-go insurance, or through a state-funded insurance provider.
In some states, a business can self-insure, but only if it’s big enough and follows a strict set of requirements.
What Is Workers Compensation and How Does It Work?
Accidents will happen when on-the-job, and once they do, you need to look after your workers’ interests. Workers’ compensation is an insurance policy to help you alleviate the financial pressure your employees will face as they stay away from work to deal with work-related injury or illness. Before taking up any contract, ask yourself, “What is workers compensation and how does it work?” to find the best fit for your organization.
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