Workers Compensation Insurance

Your employees’ health and safety are not just important to you on a personal level; without the right type of insurance coverage, a work-related injury could result in a potentially devastating lawsuit. That is why providing workers’ compensation insurance can be a lifesaver, both for you and your workers.

What Does Worker’s Compensation Insurance Cover?

Commonly referred to as worker’s comp, this insurance is designed to protect you, your company and your employees against physical accidents that happen at work. If an employee is injured on the job and you have a workers’ compensation policy, your employee does not need to prove that you as the employer were at legal fault for his or her injuries and cannot sue you for negligence. In exchange, his or her wages can be replaced while he/she is recovering, and his or her medical costs resulting from the injury will be covered.

What Does It Provide?

If someone is injured on the job, workers’ compensation insurance provides some benefits, based on the policy you purchase and the state in which you live. An injured worker can receive payments to cover his or her lost wages and get reimbursement for the costs of injury-related medical treatment. Some plans even provide benefits to survivors if a worker is killed on the job, acting as a form of life insurance. Usually, an injured worker cannot ask for punitive damages or compensation for pain and suffering via workers’ compensation, which is an advantage for you as an employer.

How Much Does Worker’s Comp Cost?

In many states, employers are required to provide this coverage to protect the people who work for them in the event of injury. How much this coverage will cost you depends on several factors. Your state may have laws that effect what you will pay. The amount of money you earn annually, the number of employees you have, and the nature and risk associated with the work you do will also be determining factors. Only by contacting companies who specialize in workers’ compensation coverage and providing them with information specific to your company can you get a true sense of what you will be required to pay. In general, however, you can usually spread your payments over the course of the year via a financing plan sponsored by your insurer.

How To Get Workers’ Compensation Insurance for Your Business

Since this type of coverage is very common and is often required, there are numerous workers’ compensation insurance vendors. Although the nature of the coverage is similar across companies, it is still important to feel comfortable with the agent you ultimately choose. Take the time to complete all initial forms carefully so that the information you are given accurately addresses your unique business needs. To the extent that you can accomplish this, you will be able to get a policy that is both affordable for you and beneficial to your workers.

No one wants to contemplate the devastation that an injury on the job can cause, but disasters such as these happen every day, and they must be planned for. Obtaining workers’ compensation insurance coverage gives your employees the care and financial relief they need, while simultaneously protecting you against protracted, damaging lawsuits.

As an employer, it might be tempting to think that your responsibilities to your injured employee end once your workers’ comp policy covers their claim and helps them with their medical bills. But in fact, you still have a very important role to play. During your worker’s convalescence, it is vital that you remain in touch with them to monitor their progress. By maintaining regular contact, you can gauge when the worker is ready to come to your return to work program. Even small companies should have some sort of return to work program that helps recovering employees re-enter the job in a productive if sometimes limited role. If you have an effective return to work strategy, you will see a reduction in lost wages and future claims as well as higher productivity levels from your employees.

Another thing to keep in mind is that workers’ comp claims should be handled as quickly as possible. Procrastinating only leads to higher costs and angrier claimants. Furthermore, the longer your employee is out of work, the less likely they are to come back.

Underwriting Guidelines

When you apply for workers’ comp insurance, you will speak with an agent who will answer all of your questions and assist you in filling out the application form. It is very important that you are as honest and forthcoming as possible with your agent in order to have the best chance of obtaining the policy that is right for you. It is then the agent’s responsibility to submit your application to an underwriter.

This person’s job is to review your paperwork in its entirety to determine what level of risk your company displays. The higher this level of risk, the more statistically likely it is that you will eventually file a workers’ compensation claim. Based on the available information, the underwriter will classify you into one of the following categories:

• You are at a below average amount of risk and are therefore an excellent candidate for a policy. Your premiums will be on the lowest tier.
• You are at an average level of risk, more than some companies and less than others. As a result, you will receive a policy and be charged the standard premium amount.
• Based on your application, you show an above average amount of risk, meaning that it is more likely that one of your employees will get hurt on the job and ultimately file a claim. As a result, you may be given a policy with modifications, and your premium will be higher than average.
• Your level of risk is so high that the company has deemed you to be uninsurable at this time. You are welcome to reapply but not for at least two years.
• There are times when the underwriter needs additional information or asks you to satisfy a particular condition before you can be assigned to a risk classification. Until the situation is resolved, you are in the “postponed” category.

You might be wondering what information an underwriter looks at in order to put you in a particular risk class. Here are just some of the factors that might be examined by a workers’ compensation insurance underwriter:

• State and federal jurisdictional laws that govern the company applying for workers’ compensation coverage. State, federal, maritime and/or longshore laws may apply to the company. Each of these has its own complex set of guidelines and specifications that the underwriter must take into consideration.
• The company’s safety records from OSHA and other sources.
• Safety inspection reports.
• What is your company’s loss history? If claims have been made against you, what steps if any have you taken to remedy any safety issues that may have caused the workplace accident?
• Does your company work with subcontractors?
• How many employees do you have?
• Details about what types of specific jobs your employees do

When an underwriter does their job well, your level of risk will be accurately assigned, and you will be provided with a policy that will protect both you and your employees from the financial consequences of accidents on the job. If you are denied coverage, your agent will explain the precise reasons. You can then take steps to improve your safety procedures and can ultimately apply elsewhere or put in another application with this company after two years.

Typical Range Of Rates For Workers’ Compensation Insurance

Unlike all other types of business insurance, workers’ comp is regulated by the states. Because each state can make its own determinations, the costs for this type of coverage can vary widely according to your geographic location. Per $100 in employees’ wages, workers’ compensation insurance costs in the U.S. range from $.74 in Texas to $2.74 in Alaska. That being said, these numbers are deceptive because they are an average of all types of jobs. Therefore, they don’t show the variations between different types of jobs in individual states.

State Regulations And Minimums

Each state in the U.S. has its own statutes that govern its workers’ compensation law. These statutes contain state-specific information on how “employee” is defined, who must be covered, any exceptions to this rule and any “exempted” employments. The details of benefits are also covered in these statutes, including medical, lost wages, death and rehabilitation. Furthermore, each set of state laws will indicate how employers can obtain the workers’ comp they are required to have: by self-insuring, using a private insurance company, taking advantage of a state-sponsored fund or an assigned risk plan.

Forty-nine states require that all employers carry workers’ comp coverage. Texas is the only one that does not make it mandatory. In spite of the fact that most states require employers to purchase workers’ comp insurance for their employees, the rules and their exceptions vary greatly.

For example, if you are a roofer in California and do not have any employees, you are still required to have coverage. The same is true if you are the sole proprietor of a construction business in Florida. Unlike many other states, Illinois does not have a state-sponsored workers’ comp fund. All Massachusetts businesses must have coverage regardless of how many hours they work. Even domestic employees who work more than 16 hours per week must be covered. The State of New York offers a competitive state insurance fund that guarantees the lowest-priced workers’ compensation coverage costs for employers.

Because each state administers its own workers’ comp, it is incumbent upon you as an employer to do your research to learn about the unique laws and rules that apply to your local area.

What To Look For When Comparing Worker’s Compensation Insurance Quotes

All workers’ comp policies are not created equal. One of the best ways to ensure that you get the best one is to choose your agent wisely. Look for a person who understands your industry and the specific workplace issues endemic to it. In addition, they should be able to give you concrete suggestions on how to improve your workplace safety. This person should also be extremely knowledgeable about the workers’ comp regulations of your state.

When choosing a policy, look for one that covers you against an employee hurting themselves while on the job as well as injury that is caused by disease either resulting from or made worse due to conditions at work. Payment of benefits should occur regardless of who is at fault except in the cases of suicide, self-inflicted wounds, criminal activity or illicit drug use. Review all policies carefully before signing. Sometimes you really do get what you pay for.

Tips For Keeping Costs Low And Reducing Risk

It goes without saying that you want to create a work environment that is good for your customers and employees alike. Part of making that happen involves doing everything you can to minimize the possibility of accidents and injuries that happen at the job site. Take some time to put these practices into place and you will lessen the likelihood of needing to file a claim.

• Review your past claims history. If you notice that certain types of accidents are happening over and over again, make some changes. For example, have several people slipped on your icy front steps? It might be time to review your winter weather procedures to come up with a better snow and ice removal solution. Are employees complaining that your plant is inordinately noisy and their ears are hurting? Invest in earplugs for all of your staff who work near noisy machinery.
• Close any claims quickly. Protracted open claims lead to higher premiums.
• Hire carefully. Make sure that the workers you bring onboard are able to do the job effectively and safely. Consult with a claims advocate to come up with a pre-screening procedure that will help you minimize the risks that you and your employees take on.
• Conduct regular trainings and safety discussions.
• Establish good rapport with your employees that encourages open communication. When you have good relationships and ongoing dialogue with your workers, they are more likely to bring issues to your attention before they become a problem.

Frequently Asked Questions About Worker’s Compensation Insurance

How long does it take for workers’ compensation coverage to take effect?

Since each state can determine the details of this type of insurance, the answer to this question is best provided by your agent or your state’s insurance licensing bureau. Without a doubt, you can be sure that your policy is active once you have received a copy and have made your first premium payment; however, it could be in effect before that time.

What specific types of workers’ compensation coverage are there in addition to the basic one?

• Black lung benefits are available for those and the survivors of those who did/do underground coal mine work or similar above-ground employment that had an equivalent exposure to coal dust. Some of these workers contract a condition called black lung, clinically known as pneumoconiosis, that is caused by inhaling coal dust. This condition is serious and can be fatal. When someone is diagnosed with black lung disease, they may be eligible for both state and federal workers’ compensation benefits. That being said, being granted both types of benefits may result in an offset to avoid a double recovery.
• Longshore and harbor insurance pertains to dock workers and maritime employees who are not covered under the federal Jones Act, as well as Outer Continental Shelf workers and government contractors who are working in foreign countries. This specific type of workers’ comp is administered by the federal Department of Labor Division of Longshore and Harbor Workers’ Compensation. Generally, a worker approved for these benefits receives 2/3 of their weekly wage while undergoing medical treatment. Covered workers are eligible for both medical and indemnity benefits. The extent of these depends on the permanency of the injury and whether the worker can reasonably be expected to obtain employment elsewhere.

What are exemptions?

In some instances, a member of a limited liability company or the officer of a corporation can apply for an exemption to opt out of receiving workers’ compensation benefits. However, keep in mind that each state is different and operates its own workers’ comp program. Therefore, first find out if exemptions are even allowed in your state.

Do I need workers’ compensation insurance if I am self-employed?

If you are a sole proprietor, an independent contractor or a freelancer, you are not automatically covered by workers’ compensation insurance. If you run a general contracting company that regularly makes work agreements with clients, it may be in your best interest to purchase workers’ comp insurance even though you are not legally obligated to do so. Failing to do so in certain industries can result in not being awarded the contracts you are vying for. That being said, it can be a challenge to find a large carrier who is willing to provide you with insurance as a self-employed person. If you encounter this difficulty, consult a private insurance agency. Many states also have workers’ compensation funds that can help you if you are unable to find what you need on the regular market.

If I have an employee with a pre-existing condition that she claims was made worse by factors on the job, will she be covered by workers’ compensation insurance?

Any employee whose condition was caused, aggravated or made worse by work conditions may have a compensable injury and can file a claim.

My workplace is a manufacturing site with very loud machinery. Someone told me that my employees could file a workers’ compensation claim against me on the basis of long-term hearing loss. Is this true?

If the worker can prove that their hearing loss is severe and was caused by work conditions, they have a legitimate claim. This underscores the need for you to carefully scrutinize your workplace for hazards such as noise pollution and to provide your workers with protective devices such as earplugs.

Are there conditions that workers’ comp will cover in addition to accidents?

There are many work-related injuries that are not the result of accidents. For instance, employees who spend most of their time using a computer keyboard may be susceptible to carpal tunnel syndrome, a repetitive motion injury that can become extremely painful over time and may require corrective surgery. Stress-related illnesses can also be covered by this type of insurance. An example would be if someone was in an extremely high-pressure position and developed a stomach ulcer as a result.

Do I have to keep my injured worker’s job open while they are recovering from a compensable injury?

You are required to give them the next similar position that becomes available as long as they can once again perform this type of work. However, if you have replaced the injured employee, you are not required to fire the new worker.

What are the parameters of federal workers’ compensation programs?

State and federal workers’ comp programs differ in several significant ways:

1. All federal claims are managed by the Department of Labor. No one is allowed to choose a third-party administrator.
2. Federal workers can currently collect workers’ comp benefits for life if they cannot go back to work. There are no settlements.
3. There are currently no requirements for second opinions or independent medical evaluations, although there are requirements for pre-authorizations.
4. The worker can choose their treating provider freely.
5. The Department of Labor claims examiners who make all of the decisions on claims have very limited resources available to them.