All About Workers’ Compensation Insurance
Workers’ compensation insurance protects your business in many ways, including helping your employees heal from work-related injuries or illnesses and limiting your business’s liability for these incidents.
Workers’ comp isn’t a one-size-fits-all solution, though, and the form of insurance features many moving parts. I’ll quickly discuss what these are, how much you might expect to pay, and what to do if you still have questions at the end of the article.
What is Workers’ Compensation Insurance?
Except for Texas, some form of workers’ compensation insurance is required for all employers, whether purchased from private insurance companies, state-run agencies, or the state itself. The exception is sole proprietors and partnerships unless they have employees.
Along these same lines, it’s important to emphasize that each state operates its own workers’ compensation system, which means that laws and coverages can differ widely.
In general, though, if an employee is injured or falls ill due to their employment, workers’ comp provides them with fair, prompt medical treatment and financial compensation. Other core coverages include:
- Lost wages – If the employee cannot work due to the injury.
- Vocational rehabilitation – If the employee requires ongoing care to help them regain employment.
- Death benefits – If an employee passes away from their injuries or illness, this coverage helps pay related costs, such as funeral expenses.
What’s Not Covered by Workers’ Compensation Insurance?
If an employee receives compensation from a workers’ comp claim, they surrender their right to litigate against the employer for related damages (aka, a ‘no-fault’ system). This isn’t the case, though, in the instance of intentional assault, battery, defamation, fraud, or a tort injury (e.g., emotional distress).
Similarly, employees can still sue their employers for gross negligence, malicious intent, discrimination, failure to promote, and wrongful termination.
Depending on the state where your business operates, workers’ comp also won’t cover illnesses or injuries from a fight instigated or intentionally caused by an employee, occurs to an intoxicated employee, is emotional only (no physical trauma), or takes place while an employee is commuting to or from work.
IHS Pro Tip: Workers’ comp also doesn’t replace unemployment benefits or disability insurance.
What Are Some Examples of Workers’ Compensation Insurance in Action?
Workers’ Comp Example 1
You’re the CEO of a large distribution company, which owns and operates several expansive warehouses and employs more than 100 laborers, stock clerks, and delivery drivers.
One day, a driver falls asleep at the wheel while in the course of making a delivery, veers off the road, and crashes into a bus stop. Thankfully, other than a tweaked back, the employee walked away with very few injuries.
However, they can’t work for at least a month while their back heals, which will require minor physical therapy so they can return to the warehouse as quickly as possible. Here, workers’ compensation insurance could provide benefits for the employee’s medical bills, rehabilitation costs, and lost wages.
Imagine, though, that a toxicology report comes back soon after the accident, which finds that they were under the influence of drugs or alcohol at the time. In this instance, the claim would likely be denied by the insurance carrier, since the employee was shown to be intoxicated.
Workers’ Comp Example 2
At another of your company’s warehouses, a maintenance employee was working on a damaged conveyor belt when it unexpectedly turned on, crushing and severely damaging their right hand.
Medical professionals determine that it will take extensive reconstructive surgery before your employee can use their hand again and additional rehabilitation so they can re-learn the fine motor skills required for their job. As a result, it will likely be two years or more before the employee can return to work.
Similarly, workers’ comp insurance will step in to help pay for the employees’ initial and ongoing medical costs, rehabilitation expenses, and lost wages.
How Much Does Workers’ Compensation Insurance Cost?
Just like any other type of insurance, what you pay for Workers’ Comp can vary widely depending on several core factors, including the state(s) in which your business operates, its industry, payroll, and claims history. This is because states set their rates based on the level of coverage a business needs and the risks faced by their employees.
For example, according to the Insurance Information Institute (III), the top 10 private industry occupations with the largest number of injuries and illnesses include:
- Laborers: 7.6%
- Truck drivers: 5.5%
- Janitors and cleaners: 4%
- Nursing assistants: 3.7%
- General maintenance and repair workers: 3.3%
- Retail salespersons: 3%
- Stock clerks and order fillers: 2.8%
- Registered nurses: 2.7%
- Light delivery service drivers: 2.5%
- Construction laborers: 2.4%
As such, if your business employs one or more of these occupations, you might expect to pay more for workers’ compensation insurance than a company that doesn’t.
With all of these details in mind, you might expect to pay anywhere between $0.50 and $2.30 per $100 of workers’ compensation insurance coverage.
How Can You Learn More About Workers’ Compensation Insurance Basics?
If you’d like to know exactly how much you might pay for workers’ compensation insurance, the team at IHS Insurance Group is standing by to a) ensure your business is adequately covered, and b) find coverage that fits within your budget.
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