Workers' Compensation Insurance Coverage

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Workers' compensation insurance, also known as workman's comp, enables workers harmed by a job-related injury or occupational illness to receive benefits. Benefits include coverage of hospital visits, doctor appointments, missed wages, and death benefits.  

Workers' comp reduces your financial liability as an employer for workplace injuries and illnesses. Workers’ Compensation will cover medical bills and lost income without any threat of an employee lawsuit.

In most states, companies must purchase workers' compensation insurance. Every state has different regulations. Check the state’s workers’ compensation oversite board, which determines when businesses must purchase this policy.  Where you do business will spell out workers comp insurance requirements? If you take on work in other states, you will need to check that state’s requirements for employers to carry workers’ compensation coverage. Businesses must purchase insurance through a licensed insurer.

Why is workers' compensation insurance important?

Workers' compensation insurance covers expenses relating to unexpected workplace injuries and diseases, which can quickly escalate due to the high cost of medical care.

As states have different laws for businesses, it’s recommended that firms have a policy in place before they hire their first employee or a certain number of employees. Workers’ compensation insurance in all states provides essential protection against medical expenses and wage loss for workers and management in the event of workplace injuries such as a slip and falls in an office, an injury from equipment, or an occupational illness.

If you're uninsured for worker's compensation, your company will be liable for payment of state benefits owed to an injured employee, even if you weren’t required to have a policy. If your business was required by law to have this coverage and did not, states can levy penalties for non-compliance to the company and owners.

What Does Workers’ Comp Cover?

Workman's compensation savings might help if your employee suffers from an industrial injury or job-related illness. It provides coverage for employees:

  • Medical expenses
  • Lost wages
  • Ongoing care costs
  • Funeral expenses
  • Occupational Illness
  • Replacement services

Worker's compensation does not apply to employees who sustain injuries or illnesses outside work. Benefits may also be unavailable for intoxicated employees who get into an accident or intentionally hurt themselves. Some states require injured employees to have a drug and alcohol test when they seek medical care following an accident.  If positive, benefits can be denied or reduced.

   Medical expenses

Workers' Compensation Insurance Coverage covers medical expenses for workplace injuries, such as ambulance rides, emergency room trips, medical treatments, etc. Ongoing medical costs, such as prescription drugs and physical therapy, are also covered.

   Missed Wages

Workers' compensation insurance can help one's worker regain wages lost due to an injury or occupational illness. If your chef burned her arm on a hot pan and has to have time off to heal, workers' comp insurance can replace some of the income that she lost.

   Ongoing Care

Work-related conditions or injuries that require continuing treatment can be particularly debilitating. For example, suppose your warehouse employee injures their back when lifting heavy boxes. In that case, worker's compensation insurance would pay for their ongoing health care costs, including physical and occupational therapy.

   Funeral Costs

If your employee dies due to a work-related mishap, workers' compensation insurance may pay for their funeral expenses and supply death benefits to your employee's beneficiaries.

   Occupational Disease

At times, your staff members can come into contact with harmful substances or allergens at work, which could result in illness. Consider lung disease or cancer, which was common in the mining industry.  These are the types of diseases covered by work comp.

   Repetitive Injury

Not all work-related injuries arise from a single traumatic incident. Repetitive injuries, like carpal tunnel syndrome, can develop from months or years of occupational use with poor ergonomic conditions.

   Temporary and Permanent Disability

Some work-related injuries can be so severe that they may permanently or temporarily disable the hurt employee.  There are many different levels of disability under workers' compensation laws.  An employee may have a temporary total disability or a permanent total disability.  There are partial temporary and partial permanent disability statuses too.  All of these gradings come with specific benefit payments depending on the severity and time frame of the ailment.

Who Is Covered by Workers’ Comp Coverage?

Several factors, such as the state, specific roles, the industry, and the number of employees, determine which companies require worker compensation coverage. Make sure you familiarize yourself with your state's workers' comp guidelines.

Some states don’t require workers’ compensation coverage for:

  • Farmhands
  • Insurance agents
  • Family members under a certain age
  • Casual workers
  • Business owners, corporate officers, sole proprietors, and partners
  • Real estate agents (classed as an independent contractors)

Federal government employees often do not qualify for state-mandated workers' comp because federal workers’ comp benefits cover them. Furthermore, they are not exempt from state workers' comp laws in every U.S. state.

Also, CheckAlabama workers compensation insurance coverage

How Much Does Workers’ Comp Cost?

The workers' compensation costs vary due to factors including the state of employment, the company’s payroll, job duties, the industry, the insurance provider, and the company's loss history. 

For example, clerical office employees may have a rate of $0.09 per each $100 of payroll, so an office with $500,000 in payroll would only cost $450 plus surcharges and fees.  Alternatively, an interior trim carpenter’s rate may be $5.35, resulting in a base premium of $26,750 annually with a payroll of $500,000.  Note, all states set minimum premiums by class code and state.

What does workers' compensation insurance not cover?

Injuries caused by intoxication, drug use, or company policy violations

If an employee driving under the influence of drugs or alcohol gets injured while under the influence, workers' compensation benefits may be denied.

In addition, workers' compensation benefits are not guaranteed in some states if an employee does not follow company safety and health procedures, such as wearing a hard hat when operating heavy machinery.

Injuries reported after firing or dismissal.

If you make workers' compensation claims for injury after your job's termination (including getting fired or laid off), your claim may be denied. But, if the incident causing your injury occurred before your termination, you are still eligible for benefits.  

OSHA and Safety

OSHA makes it compulsory for workplaces with heavy machinery to follow safety guidelines. If an employee suffers workplace injuries that could have been prevented if OSHA regulations had been followed, the employer may be held accountable for not enforcing the safety measures in the workplace.  OSHA non-compliance fines can be costly.

The Bottom Line

Workers' compensation insurance coverage safeguards workers at the state level, offering medical treatment, lost wages, temporary or permanent disability, and death benefits.  Workers' compensation benefits are paid regardless of whose fault it may have been for the accident.

Employers’ Liability

Workers’ Compensation policy almost always included Employers’ Liability coverage, which is also important.  This coverage differs from the Workers’ Compensation benefits provided.  Employers’ Liability serves by stepping into the employer’s shoes for employee negligence lawsuits against the employer. This liability protects the employer from incurring significant legal expenses if a defense is needed for an employee lawsuit.