In 2019, there were 2.8 million nonfatal workplace injuries reported in the US according to the Bureau of Labor Statistics. That equates to a workplace injury being reported every eleven seconds.
Workers’ comp insurance provides benefits if your employee has a work-related injury or illness.
It’s so important that nearly all 50 states in the U.S. require businesses to provide workers’ comp coverage.
In this article, we’ve explored the key elements of workers' comp:
● What is workers’ comp coverage?
● What does the insurance cover?
● How does it work?
● Benefits of workers’ comp coverage?
● Who pays workers’ comp insurance premiums?
We’ve also explained the who, why, and what for employees and employers.
Without further delay, let’s jump in!
What is Workers' Compensation Insurance?
Workers' comp coverage is a form of insurance designed to provide compensation for employees who become disabled or injured in the course of their employment.
It's also known as "workman's compensation" or "workers’ comp."
The employee’s medical fees and wage replacement, or other related losses due to a workplace injury are covered by the employer and in turn the employee waives their legal right to sue the employer for negligence or make claims on the grounds of negligence which could potentially result in higher damages — also called a "compensation bargain."
Workers’ comp serves both parties by limiting and protecting them from legal recourse due to work hazards.
What Does Workers' Compensation Insurance Cover?
Plans generally vary from state to state. However, here are the basics things covered under workers’ comp insurance:
- Medical treatment for the injured employee
- Temporary disability (as much as 2/3 of average weekly wage)
- Total disability (usually paid in a lump sum)
- Permanent impairment (such as a loss of finger)
- Death benefits (usually paid to the employee’s dependents or survivors)
- Employers liability
How Does Workers' Compensation Work?
The process varies for each state, but most employers guide the employee through the claims process once the need arises.
The timeframe for reporting and initiating a claim varies in each state—for instance, employees in New York have up to 30 days after the injury.
Some states require three days; others allow employees to report occupational injuries and illnesses for up to a year or more.
If the injury takes time to develop, employees should report it as soon as it's discovered.
Depending on the insurer and the state, some policies may cover only visits with select approved health care providers, so employees should be sure to check the employer’s requirements before initiating a visit to the doctor.
Most employees are required to pay for their medical expenses upfront and are later reimbursed by the insurance company.
The insurance company may choose to pay the health care provider directly in certain situations, but the employee should be ready to foot the bill at their initial doctor's visit.
3. File a Claim
This is where the employer files a claim.
At this stage, the employer provides the employee with a state-mandated form to provide details and documentation of the event that caused the injury.
After processing the claims, the employee is entitled to payment disbursements for all related medical fees and other benefits.
Besides payments for medical expenses, workers’ comp also provides the injured employee with ⅔ of lost weekly wages for being out of work.
Either way, involving an attorney in the negotiation is a step in the right direction to cover future medical costs related to this incident.
Note: Employers can dispute claims if the illness or injury was not work-related. The dispute process varies in each state, and it likely requires that the dispute is to be filed with the workers’ comp agency or be presented to an advisory panel for a decision.
Once a claim is settled, the employee ceases to have rights to coverage for future medical bills.
Benefits of Workers’ Compensation Coverage?
Note: Workers' comp is no-fault coverage, so employees are paid even if they are responsible for the sustained injury.
Who Pays Workers’ Compensation Insurance Premiums?
- The industry involved (some industries are more work-hazard prone)
- The type of work carried out by the employees do
- The state in question
- The number of employees in the company and their annual payroll
- The claims history of the employer
High-risk companies such as manufacturing and production companies usually pay significantly higher premiums than safer companies.
This review is only meant to touch on the basics of workers’ comp.
Remember: it is there to protect both the employer and the employee from unforeseen work-related injuries, lawsuits, and unnecessary costs.
If you’d like to learn more about this type of insurance for small businesses, check out some of our other guides and videos. If you’re shopping for small business workers’ comp coverage, you can buy online today — no phone calls or paperwork required!