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Workers' compensation insurance in 2023. What is workers' compensation insurance?

Workers' compensation insurance in 2023. What is workers' compensation insurance?

Employers are legally obligated to ensure that their workplaces are safe for their employees. Nevertheless, accidents do happen. When accidents do occur, workers' compensation insurance provides coverage.

Workers' compensation pays vital benefits to employees when they are injured or sick resulting from working for their employer.

This guide to workers' compensation insurance will cover what it is and why small businesses and contractors need it.

Table of contents

  • What is workers' compensation insurance?
  • How does workers' compensation work?
  • Why is workers' compensation insurance important?
  • What does workers' compensation cover?
  • What injuries are covered?
  • What does workers' compensation not cover?
  • FAQ about workers' compensation insurance
  • Workers' compensation insurance cost

What is workers' compensation insurance?

Workers' compensation (or workers' comp, as it's also known) helps provide wages and medical care costs for employees who become injured on the job.

It is the responsibility of the employers to pay for workers' comp coverage. Employees don't contribute to the fund.

To summarize, workers' compensation insurance serves two main purposes.

  1. It assures injured or sick employees get medical care and compensation for a portion of lost earnings while they cannot work.
  2. It normally protects employers from lawsuits against workers who become sick or injured while working.

Workers usually receive compensation benefits regardless of who was at fault in any accident that caused the injury.

In addition to rehabilitation and injury expenses, workers' compensation may compensate their family if an employee is involved in a fatal accident. Workers' comp can provide death benefits for the worker's beneficiaries (or dependents).

Workers' compensation benefits are typically paid once the employer or the insurance company confirms that the illness or injury is work-related. If the claim is rejected, a workers' compensation judge has to decide on the case.

How does workers' compensation work?

To receive workers' compensation, the injured employee must immediately visit a healthcare professional. The doctor should then provide them with medical reports to support their claim.

Employees can then begin filing a claim as outlined by their employer.

If the claim is approved, the employee will receive their compensation payments and return to work when they feel ready.

As previously mentioned, if the claim is not approved, the employee will have to take the case to a compensation judge.

Why is workers' compensation insurance important?

Workplace illnesses and injuries can escalate rapidly due to the expensive costs of medical care. Workers' compensation insurance covers these costs, adding a layer of protection for the employer who has to provide them.

While workers' comp laws vary, most small businesses must have a policy when hiring their first employee. In most cases, it is necessary when they employ any number of employees.

Even when workers' compensation is not required by law, this policy can prove vital to protect against employee lawsuits related to workplace injuries, such as accidental falls at work, an injury from work machinery, or an occupational illness.

Without workers' comp insurance, your business will be responsible for covering medical bills and legal fees. Some countries also levy costly penalties for non-compliance.

What does workers' compensation cover?

Disability benefits

A serious workplace injury or occupational illness can cause an employee to be on leave for weeks or months. Workers' compensation benefits can cover part of their wages during this time while they are recovering. This benefit is available if the injury caused a partial or permanent disability.

Medical expenses

Workers' compensation insurance covers immediate medical care expenses for workplace accidents, such as surgical procedures, transportation, emergency room visits, and other medical bills. Any medication and physical rehabilitation during ongoing care is also covered.

Compensation for fatal injuries

Workers' compensation can pay a death benefit if a work-related incident is fatal. This benefit will help to cover funeral expenses and help support the deceased employee's dependents.

Lawsuits related to workplace injuries

Employer's liability insurance is usually included in workers' compensation insurance. This protects employers against lawsuits related to work injuries.

For example, employees might claim their injury was caused by a lack of basic workplace safety. If they sue their employer, this coverage will usually pay for the following:

  • Court costs
  • Attorney's fees
  • Settlements or judgments

In summary, these are the benefits covered by workers' compensation insurance:

  • Medical expenses
  • Lost wages
  • Disability benefits
  • Ongoing care costs
  • Death benefits

What injuries are covered?

If an employer offers workers' compensation insurance, any injuries that employees sustain on workplace premises (or anywhere specified by their policy) will be covered.

Traffic accidents that occur when an employee travels for work purposes are the leading cause of workers' comp death claims, whether the journey was made in a company car or the employee's own vehicle. However, accidents driving to and from work are usually not covered.

In addition to accidents, other injuries employees may sustain while working are covered, including terrorist attacks, workplace violence, and natural disasters.

Workers' compensation insurance also covers occupational diseases and other illnesses contracted while employers were on the job. For example, employees who are exposed to toxic chemicals while at work.

What does workers' compensation not cover?

Regardless of the number of hours employees work, workers' compensation insurance will cover them. However, there are exclusions.

Exclusions could result in a worker's compensation claim being rejected. These are:

Injury claims after layoff or firing

If an employee makes claims of injury after termination (including being laid off or fired), they will not be eligible for compensation. Employees must actively work at a company to receive workers' compensation coverage.

Intoxication or substance abuse injuries

If an employee is under the influence and intoxication leads to their injury, workers' compensation benefits will usually not apply.

In addition to that, if an employee violates company policies. For example, if they do not take safety measures as laid out to them. Suppose a laborer doesn't wear protective gear and gets injured when working with work equipment. In that case, they will not be entitled to workers' compensation benefits.

Commuting to work

The journey to and from work is typically excluded from workers' comp coverage. However, employees traveling in a company vehicle may be covered, such as traveling salespersons.

Wages for a replacement worker

If an employee cannot work due to injury and the business hires a replacement worker, workers' compensation will not cover the temporary worker's salary. Furthermore, the injured employee would still be entitled to lost wage benefits.

Workplace fights

If an injury occurs during a physical fight with a colleague, the sustained injuries may not be covered. However, there are exceptions, for example, if the fight is about work.

OSHA fines

Occupational Safety and Health Administration (OSHA) requires workplaces to ensure they are safe for employees. For example, ensuring that those operating heavy machinery, such as manufacturers, follow safety guidelines.

If an employee gets injured while ignoring OSHA safety protocols, their employer may receive non-compliance fines. These fines are not covered by workers' comp.

Key takeaways

Workers' compensation insurance provides financial coverage for workplace accidents.

Also known as workers' comp, workers' compensation helps provide wages and medical care costs for employees who become injured or sick while working.

Workers' comp can also cover legal expenses if injured employees sue their employer for failing to prevent an accident.

FAQ about workers' compensation insurance

Who pays for workers' compensation?

Employees do not contribute funds to this coverage. Employers pay for workers' compensation through private insurance companies or a governing body.

How long will workers' compensation last?

Policies vary, and different locations have different rules. Some may limit the duration of workers' compensation payouts. These limits can be anywhere between three and seven years, for example. However, the age of an employee may also affect the payout.

Is workers' compensation taxable?

Workers' compensation benefits and payments aren't taxable. However, if the injured person is receiving retirement benefits, disability insurance, or supplementary benefits, they may have to pay taxes on a percentage of the benefits.

Do self-employed people need workers' comp?

Typically, self-employed workers are not required by law to have workers' comp. Businesses that hire employees need to buy workers' compensation insurance.

Do independent contractors need workers' comp?

Independent contractors and other self-employed business owners may be required to buy workers' compensation to fulfill the terms of a contract.

Your clients need to protect themselves from the expense of a workplace injury. Therefore, most will require contractors to carry their own business insurance, including workers' comp.

How can I save money on workers' comp insurance?

To save money on workers' compensation insurance, correctly classifying your employees is essential. This way, you will avoid misclassification fines.

Generally, employees with a low risk of injury cost less to insure, for example, those with desk jobs. Pay-as-you-go workers' compensation is sometimes offered to small business owners, which offers low upfront premiums.

Additionally, some small business owners with few risks and a small number of employees are eligible for a minimum premium workers' comp policy.

To keep your premiums low, having a documented safety program can also help to lower your workers' comp costs. A safer workplace equals fewer accidents and expenses.

What is the difference between workers' comp insurance and general liability?

Both deal with bodily injuries, but general liability insurance protects your business when a third party suffers an injury on your property and takes legal action. In contrast, workers comp' insurance covers expenses resulting from employee injuries sustained while working.

Learn more about general liability insurance here.

Does workers' compensation cover COVID-19?

The answer to this will depend on where the employee contracted the virus. Workers' compensation should provide coverage if an employee is exposed to the coronavirus because of their job.

How can I file a workers' compensation claim?

The first step in filing a claim is to report your work-related illness or injury to your employer. After you have reported your illness or injury, your employer will notify their insurance provider.

The Occupational Safety and Health Administration (OSHA) should be involved if you have suffered a severe injury.

Your employer can dispute your claim if they do not believe your injury or illness was caused by work. In that case, you may need to appear before a workers' compensation board to make your case for receiving workers' compensation benefits.

See more frequently asked questions about employer’s liability here.

Workers' compensation insurance cost

Workers' compensation costs (or premiums) are based on the job classifications of employees. These job classifications reflect the riskiness of the insured's job.

For example, electricians and builders carry out high-risk work. Other high-risk jobs include firefighters and police officers, whereas office jobs are considered low-risk jobs.

Workers' compensation costs are calculated based on a few factors, including:

  • Payroll
  • Location of work
  • Number of employees
  • Industry and risk factors
  • Coverage limits
  • Claims history
  • Workers compensation quote

With 35 years of experience, Pitsas Insurances can guide you to find the right business insurance according to your specific needs.

Our employer's liability insurance protects employers from liability arising from injury to employees, disease, or fatality due to workplace conditions or practices.

Business insurance USA

For companies registered in the USA, you can receive quotations from Progressive Commercial.

Business insurance UK

For companies registered in Britain, you can receive quotations from Simply Business.

Business insurance Cyprus

For companies registered in Cyprus, you can receive a quotation from Pitsas Insurances by completing the quotation.

If you have more questions, contact our insurance experts and work with a licensed agent to determine your needs. We offer a fast turnaround.

To find out more about how our team of insurance experts can help you, see here.

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