Every business needs to calculate and mitigate risks. And if you have employees, workers’ compensation insurance is a non-negotiable requirement. In almost all states in the U.S., companies are required by law to provide employees with the necessary benefit covering any injury or illness that occurred in the workplace while they are on the job.
Workers’ Compensation as a Statutory Requirement
One of the first things every business needs to understand about workers’ compensation insurance is that while it is a statutory requirement, the rules vary from state to state. As such, it is essential that you know the rule that applies in the state or territory where your company operates. This variation in rules and regulations also means that there are no uniform guidelines when it comes to the benefits, premium, coverage, and exclusions. If your company plans to expand into other states in the country, you will need to deal with insurance coverage separately.
Who Needs Workers’ Compensation Insurance?
For every business, whether large or small, it can be challenging to handle the complexities of meeting the legal requirements of providing workers’ compensation insurance. Moreover, it takes significant effort to ensure that you have enough coverage at the right cost. Therefore, one of the first questions you need to ask is whether or not your company needs workers’ compensation. Yes, there are exemptions to this requirement.
In general, workers’ compensation by Next Insurance is designed for businesses that hire employees who are not the owners. It means that if you have a sole proprietorship or own and operate the business with partners, you technically do not need workers’ compensation; unless your partner is also an employee of the company. In most states around the country, it is optional to buy compensation for yourself or your partner.
Another case to case scenario is insurance for commission-based employees. Although it may seem that coverage is not necessary, there may be states that require it. Since rules also change periodically, you may need updated information on the guidelines in your area.
What is interesting about this type of insurance is that there are a few states, like New Jersey for example, that allow companies not to buy workers’ compensation insurance. Nonetheless, it does not exempt the business from liability under the law when it comes to compensating employees for work-related injuries.
The last point you need to consider is whether your company regularly hires contractors and subcontractors. Although they are not technically employed by your business, you may still be liable to compensate for injuries sustained when it happened on your company premises for work you contracted. That is why it is a best practice to hire contractors that have workers’ compensation insurance coverage.
Benefits Included in Workers’ Compensation Insurance
Indeed the varying laws from one state to another make workers compensation insurance different in terms of coverage and benefits. But in general, the blanket inclusions of every policy should cover the following:
Coverage for medical expenses. When an employee files a claim for any work-related illness or injury, the insurance covers the cost of hospital treatment, doctor’s appointments, diagnostic tests, medication, and nursing care. Most of the time, any medical-related expense should be paid for by the insurance. The good thing is, that the insurance will pay these expenses until the employee fully recovers. But there are always limitations, depending on the guidelines set in your state. There is also a network of providers that an insurer accredits so that these services are provided at a discount.
Coverage for disability. The disability benefit is intended to pay for the amount of wages the employee lost during the time he is recovering from a work-related injury or illness. Insurance policies strictly categorize disabilities as either total temporary, partial temporary, total permanent, or partial permanent. The amount the employee receives will also vary based on state laws and the type of disability sustained. But because state laws mandate the computation, it is possible for two persons living in different states to receive different amounts after sustaining identical injuries.
Coverage for rehabilitation. While not all, a majority of states will include rehabilitation in the insurance coverage. What this benefit entails is getting the necessary psychological or vocational help to assist in the employee’s full recovery. For example, someone who suffered both physical and mental trauma may need psychological rehabilitation before he can be considered fit to return to the same line of work.
Death benefits. The last essential inclusion in a workers’ compensation insurance policy is death benefits. When the employees pass away because of the injury or illness sustained while on the job, the family of the deceased is entitled to receive death benefits. To a certain extent, the insurance policy should also pay for burial expenses.
These four benefits are the basic inclusions of any workers’ compensation insurance policy, regardless of where you live. In addition to a clear understanding of the inclusions, it is also essential that you understand what the policy entails as well as your responsibility as the employer.
Unlike other types of business insurance, workers’ compensation is unique because the policy typically does not have a maximum coverage limit. What this means is that the employer passes the liability to the insurance company for all claims filed by an employee against the benefits or inclusions of the policy.
What about the employer’s liability coverage?
The section of workers’ compensation insurance regarding the benefits and coverage is easy enough to understand. But not every employer is clearly aware of what employer’s liability coverage entails. In general, this section covers the employer for any liabilities associated with illness or injury sustained by an employee that is not included in the state-mandated benefits.
One example is when an employee sustains an injury while at work, but decides to sue a third-party. In case this third-party pass the liability to the employer, the employer may be covered under the employer’s liability section of the insurance policy.
In conclusion, there is a lot to learn about workers’ compensation insurance. It is upon the employer to ensure that he knows what the coverage entails and how it benefits not only the employees but also the company’s business interests.