Workers' Compensation Insurance (formerly "workman's comp") emerged from a "grand bargain" between business owners and workers. Business owners were tired of being sued by injured workers. Workers were tired of being injured.
So Workers' Comp Insurance was designed to help pay for work injuries and illnesses without the rigmarole of a lawsuit. As the video explains, the policy can help your business do three things:
Most states require employers to buy Workers' Compensation Insurance as soon as they hire their first employee. Even when that's not the case, it's smart to have this policy, because the cost of workplace injuries is substantial:
The takeaway: workman's comp injuries cost small businesses in lost productivity. Without insurance, those costs would be compounded by employee medical expenses and missed wages.
Work injury claims cost $36,551 on average.
Employee Work Illness & Injury Expenses
Workers' Comp can help pay for medical expenses and missed wages for employees who are hurt on the job. If an employee dies, the policy can cover funeral expenses.
State Law Compliance
Most states require employers to carry Workman's Compensation Insurance as soon as they hire their first employee.
Employee Injury Lawsuits
If your employee suffers an occupational injury your state doesn't require Workers' Comp Insurance to cover, the employee may sue you to recoup medical expenses.
The most common Workman's Comp Insurance claim is for an injury that can happen anywhere: falls on the same level. Fully 17 percent of workplace accidents are caused by same-level falls, according to a 2014 Bureau of Labor Statistics report [PDF]. One trip over a computer cord, and you could be facing a pile of employee medical bills. (True story: OSHA lists "trip over self" as a category of workplace injury.) But it's not just accidents. Sometimes an employee's job can hurt them even if they don't work in a high-risk industry.
Take the video's example: Your copywriter churns out articles all day, but constant typing gives her carpal tunnel syndrome. Because the injury is work-related, she can recoup her medical expenses from your business.
If you have a Workers' Comp policy, that's no big deal. The copywriter can make a claim to cover corticosteroid injections or corrective surgery and partial wages for the time she needs to recover.
Monday is the most common day of the week for a Workers' Comp injury. Because of course it is.
You can turn your Workers' Comp policy to help pay for employees' work-related injury or illness expenses, including...
But it can't pay for:
Falls on the same level cause 17% of Workers' Comp claims.
Forty-nine states currently require employers to carry some form of Workers' Comp Insurance. Here's the catch: every state has its own spin on those laws.
As you saw in the video, some states require employers to carry coverage as soon as they hire their first employee (California and Illinois are examples). In other states, the mandate kicks in once you have a certain number of employees (for example, four in Florida and five in Tennessee).
Only Texas allows employers to opt out of carrying insurance altogether. However, Texas employers can still be sued over uncompensated work injuries.
To complicate matters more, four states only allow you to purchase coverage from state-run funds. These states are...
So what happens if you skip out on Worker Compensation Insurance when your state requires it? It depends on where you live, but generally, you face fines and even jail time for serious offenses.
Click on your state below to learn about its Worker Compensation Insurance laws.
IL employers face fines up to $500 per day for not carrying Workers' Comp.
According to the Bureau of Labor Statistics, there were 3 million non-fatal work injuries in 2014. What happens when Workers' Comp benefits don't cover one of those accidents?
Answer: businesses turn to Employer's Liability Insurance, the second part of a Workman's Comp policy. This coverage can help cover lawsuits over employee work injuries.
We know what you're thinking: Workers' Comp is supposed to help me not get sued. What gives?
As the video explains, Workers' Comp benefits only cover what the state requires them to cover. In some states, certain types of workplace injuries and illnesses may not be eligible for Workers' Comp benefits.
Furthermore, an employee could allege you were negligent – for example, say you asked him to change a lightbulb by climbing a ladder that bore a striking resemblance to the leaning tower of Pisa. In negligence cases, you can still be sued. Employer's Liability Insurance helps you out when employees sue to cover their medical bills for ineligible work injuries. It can help pay for your...
Download the free eBook Taking Care of Business: The Small Business Guide to Workers' Compensation Insurance, a guide to making sure your employees are covered and your business is in compliance with state law.
US businesses had 3 million work injuries in 2014.
per $100 in wages in CA
per $100 in wages in TX
per $100 in wages in IL
per $100 in wages in NY
Workers' Compensation Insurance rates vary from state to state. For example, per $100 in employee wages, rates range from $0.75 in Texas to $2.74 in Alaska. Behind those rates are a lot of variables. The cost of Workers' Compensation depends on:
The National Safety Council notes [PDF] that the cost of medical expenses for occupational injuries was $198 billion in 2011. As we mentioned earlier, that same study found that the average work injury claim costs about $36,551.
Chances are, your Workers' Comp premium is a much better deal. For more cost details, see the Workers' Comp Insurance Quote Analysis in our business insurance cost analysis section.
Treating occupational injuries cost $198 billion in 2011.