How Does Workers’ Compensation Work?
Workers' compensation is a useful and necessary insurance purchased by well-informed employers who want to ensure protection from employee related litigation. By purchasing a workers’ compensation policy, the employer cannot be sued by the employee for their injuries in most cases. This insurance benefits employees who suffer from work-related injuries or occupational diseases. Workers' compensation aims to support workers and ensure they receive appropriate medical treatment and financial support while they recover from their injuries.
Are you aware of what workers' compensation coverage does and how it functions? Many business owners sign up for it due to legal requirements but may not clearly understand its purpose and operation. When an employee files a claim, confusion may ensue.
Be well-prepared for such situations, familiarize yourself with the essentials of workers' compensation. This article will provide a concise overview of the basics, ensuring you know what to anticipate when dealing with a worker’s compensation claim.
Who is obligated to have workers' compensation insurance?
You should consider purchasing workers' compensation insurance (WC) even if your company employs one individual. Though states differ in the requirement for when a company must purchase a policy, this doesn’t mean a company that doesn’t buy the policy is free and clear of liability. The employer will still be responsible for an injured employee’s economic and financial loss resulting from the injury and without WC can be sued by that employee. By buying a policy, the employee cannot sue the employer. Most state regulations mandate businesses obtain this coverage when they reach a specific number of employees.
Though Texas is the only state where workers' compensation insurance may be optional, employers must meet requirements to be approved to self-insure losses from employee injuries if they opt not to take a policy. One requirement to be self-insured in Texas is that your company pays a minimum of $500,000 for workers compensation coverage. For businesses in Texas, it is recommended that a workers’ compensation policy be purchased to aleviate the financial responsibility of the employer to pay statutory WC benefits. In other states, the requirement for coverage typically arises when a company hires its second, third, or fourth employee.
Even if your business operates in a state where workers' comp insurance for just one employee is not compulsory, acquiring a policy as soon as you hire someone is highly recommended.
Here's how workers' compensation typically works:
Employer Coverage: Employers may be required by law to provide workers' compensation coverage for their employees. The specific requirements vary by jurisdiction, but generally, businesses with a certain number of employees must have workers' compensation insurance.
On-The-Job Injuries: If an employee suffers an injury or suffers from an occupational related disease while working at any location, they file a workers' compensation claim. A claim could result from an accident, such as a slip and fall, repetitive strain injuries, cuts, fractures, sprains or occupational disease such as carpal tunnel syndrome.
Reporting the Injury: The injured employee must immediately notify their supervisor or employer. The specific time limit for reporting employee injuries to the carrier and the state varies by jurisdiction, but it's essential for the employer to report the injury within 7 days of receiving the employee’s report. Fines for late reporting apply in most states and can be costly, depending on how late the claim is filed. Typically the First Report of Injury filed with the insurance carrier by the employer is also forwarded by the carrier electronically to the worker’s compensation governing board of the appropriate state.
Medical Treatment: The injured employee is entitled to receive necessary medical treatment for their work-related injury or occupational disease. Workers' compensation typically covers medical expenses, including doctor visits, hospitalization, medication, surgeries, prescriptions, rehabilitation, medical travel expense, replacement services and doctor prescribed physical therapy.
Workers' compensation provides benefits which may include:
A. Wage Replacement: Employees are entitled to wage replacement benefits if the injury prevents them from working. There is usually a waiting period of seven days, and if still unable to work after the first week, employee is reimbursed for both the first week and the second week. The amount usually corresponds to a percentage of their average earnings, typically around two-thirds, but it may vary by jurisdiction.
B. Temporary Disability: When a WC claim is filed with the carrier for lost wages, it will usually fall into several disability categories. If the injury is temporary and the employee is unable to perform any work during the recovery period, it would be classified as temporary disability benefits until they can return to work. If they are able to perform some type of job, even different from their normal job duties, they may be compensated under partial temporary disability.
C. Permanent Disability: In cases where the injury results in permanent impairment or disability, the employee may receive permanent disability benefits. These benefits can be broken down to partial permanent disability or full permanent disability, depending on the employee’s ability to perform any type of work. The amount paid for each is determined by the extent of the disability (full, partial with a percentage rating) and its impact on the employee's ability to do any sort of work, not just the job they had performed before.
D. Vocational Rehabilitation: In some cases, if there is severe injury which prevents the employee from returning to their previous type of work, workers' compensation may cover vocational training to help the employee acquire new skills and find alternative employment.
Legal Protection: Workers' compensation laws generally provide legal protection for both employers and employees. Employees who accept workers' compensation benefits usually waive their right to sue their employer for the injury, except in cases of gross negligence or intentional harm.
Consult your state's workers' compensation governing board if you need more information on the claim process. Or, you can consult InsuranceAdvisor.com when purchasing a policy, our insurance agents will gladly assist you regarding any questions related to workers’ comp insurance.
Frequently Asked Questions (FAQ) about Workers' Comp Insurance
1. How does workers' compensation work?
When an employee is injured or suffers an occupational discase, they must immediately report to their employer. The employer files the claim with the WC insurance company. The carriers adjuster then evaluates the claim and determines if it is eligible for benefits. If approved, the injured employee receives compensation for portion of their lost wages and medical expenses incurred are paid.
2. Who is eligible for workers' compensation benefits?
In general, any employee injured on the job or suffering an occupational disease are eligible for workers' compensation benefits. This includes full-time and part-time employees, as well as temporary and seasonal workers. However, workers' compensation may not not cover independent contractors and volunteers unless disclosed on the application and premium paid for same.
3. How long do workers' compensation benefits last?
The duration of workers' compensation benefits varies depending on the nature and severity of the injury or illness. In general, benefits may cover medical expenses, rehabilitation costs, and a portion of lost wages. Medical professionals will determine the length of time for receiving benefits and may continue until the injured worker has sufficiently recovered or reached maximum medical improvement. Benefits could be paid for life depending on the circumstance.
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