What Does Workers' Compensation Insurance Cover?
Workers' Compensation Insurance covers the expenses that come with an employee's work-related illness or injury. This may include immediate costs like an ambulance ride to the ER and long-term costs like physical therapy or lost wages. There's even a portion that covers your legal fees if an employee decides to sue.
State laws require most employers to carry Workers' Comp Insurance in case employees are hurt on the job. Not sure whether you need Workman's Comp? Check out this guide to Workers' Compensation laws by state.
Let's take a look at five things Workers' Compensation covers.
1. Medical Costs to Treat Immediate Injuries and Illnesses
A business should take every practical measure to prevent worksite injuries and illnesses. But sometimes accidents happen anyway. Say a new hire slips on a puddle and breaks her arm or a mistaken measurement on your construction site leads to a severed finger.
When an employee is injured and needs medical attention, the employer can be (and usually is) responsible for covering the cost. What does Workman's Comp cover? In this case, the policy can pay for those emergency room visits, ambulance rides, and other medical bills.
Is your business responsible for every type of worker injury? It depends on your employees' status and your industry. As a general rule, every W-2 employee is entitled to Work Comp benefits. To learn more about how worker classifications impact your obligations, read the post "Workers' Comp Insurance: When Is Someone a Contractor?"
2. Missed Wages
So what happens when your employee has an accident and can't work for a while? Most laws require you to pay for at least a portion of their missed wages while they recover. This can mean weeks of pay on top of finding, training, and paying a temporary replacement worker. All told, the lost work can be a huge expense (for example, in 2010, a lost-work claim in California cost an average $65,000!). Workers' Comp can cover these missed wages and reduce your financial burden.
When you buy a policy, you may have the choice of whether to have your Workers' Compensation cover a percentage of employees' missed wages or a fixed dollar amount. This is a good time to ask your insurance agent to offer guidance on what makes the most sense.
3. Ongoing Care
Sometimes, a work injury or illness is so severe that the employee needs ongoing care – surgery, rehabilitation, treatment from specialists, etc. Even if that employee never returns to work, your business may be responsible for the cost of their care. But don't fret. Many Workers' Comp policies cover these costs.
4. Funeral Costs and Death Benefits
If a work tragedy ends with an employee's death, Workers' Comp Insurance can cover funds for funeral expenses. This lets you, your staff, and the employee's family grieve without worrying about money.
Some Workman's Comp Insurance even covers death benefits, such as support payments to the employee's dependents. Offering these benefits can help you retain quality workers if you operate in a high-risk industry.
5. Legal Costs if an Employee Sues You over the Injury
If an employee is hurt at work and thinks your business is to blame, you may face a lawsuit (unless your state has an "exclusive remedy" rule for Workers' Comp Insurance). Unfortunately, the cost of a lawsuit can be tremendous.
Luckily, if your Workers' Comp policy has Employer's Liability coverage, the insurance company can help you pay for attorney fees, court costs, and judgments or settlements.
How to Know What Your Workers' Compensation Covers
Not all Workers' Comp Insurance policies are the same, and not all states require the same type of coverage. Check your state laws to see what your business needs.
As long as you're reading up on your options, you might want to learn what Workers' Compensation doesn't cover. For example, Workers' Comp doesn't cover safety improvements, OSHA penalties, injuries to a customers, or wages for a replacement employee.
If you have questions, feel free to contact us. Our agents can help you find a Workers' Comp policy that covers your business's risks and adheres to your state's regulations.