What is worker’s compensation insurance?

Accidents happen, as the saying goes, but a work-related bodily injury is never simple. If one of your employees suffers a work related injury or is made ill through the course of performing their job functions, it isn’t just a matter of misfortune or inconvenience – your business could face potentially catastrophic consequences.

Roxanne muscle image as Rosie the Riveter

This is where worker’s compensation insurance comes into play. Often referred to simply as worker’s comp, this coverage pays benefits to workers injured on the job, including medical costs, a portion of lost wages, and permanent disability. In turn, injured employees waive their right to file a lawsuit against you, as their employer, for their injuries. This coverage will also pay death benefits to an employee’s family in the unfortunate event that they are killed on the job.

Most importantly, most states require employers to carry worker’s compensation insurance and employers’ liability insurance by law. Business owners who do not have the proper coverage can be heavily fined, even if it’s the first time an incident has ever occurred.

What is covered by worker’s compensation insurance?

Obviously, there are certain industries that are inherently more dangerous than others, but all businesses face the risk of an employee getting injured on the job or ill due to certain workplace exposures. This includes injuries caused by lifting heavy equipment, slips and falls in the workplace, injuries due to fires or machinery, exposure to hazardous substances, and injuries that develop over time such as carpal tunnel syndrome. 

Of course, worker’s compensation insurance does not cover employee injuries unrelated to their job duties or that occur outside of the workplace. It also does not cover injuries sustained while commuting to and from work, or those caused by intoxication or substance abuse.

While the majority of your employees would be covered under a worker’s compensation insurance policy, including contractors and volunteers, it’s important to note that there are certain types of employees that may not be covered by your policy, such as seasonal workers. Furthermore, most sole proprietors are not required to carry worker’s comp for themselves.

How much does worker’s compensation insurance cost?

The cost of worker’s comp can vary from state to state, as well as from carrier to carrier. There are several things that factor into calculating your premiums, including:

  • Your amount of payroll
  • The type of work your employees do
  • Your business’s location
  • Your history of claims

Experience Modification Factor

If your business has a long history of claims, your premiums may end up higher, as insurers will use what is known as an experience modification factor to calculate your rates. Conversely, if your business is brand new and therefore has no history of claims, your premiums may be higher until you have established a track record.

What are an employer’s responsibilities?

Depending on the state in which your business operates, there may be certain things that you are required to do in order to comply with worker’s compensation insurance laws.

First and foremost, providing coverage to your employees is required. Additionally, you are responsible for paying premiums and providing your insurance carrier with accurate payroll numbers. You are also responsible for notifying your carrier as soon as possible after a workplace injury or illness.

There are also certain precautions you must take to mitigate the risk of someone getting injured on the job. Providing a safe work environment for your employees is not only required by worker’s compensation insurance laws, it’s also a good business practice to protect your workforce. This includes investigating injuries that do occur and taking the steps necessary to fix any issues that might cause another incident in the future.