As you may know from our previous posts, Workers’ Compensation Insurance isn’t like other policies. The first big distinction is that the laws of your state govern the policy. In other words, unless you live in Texas, carrying Workman’s Comp is compulsory. (You can learn more about your state’s stipulations in our guide Workers' Compensation Insurance Laws by State.)
The second difference is that the policy primarily benefits your employees. Of course, as your employees are the backbone of your business, the coverage indirectly benefits you, too. Let’s take a look at how Workman’s Comp protects your employees, and in turn, your business.
Workers’ Compensation’s Benefits
Worker's Compensation Insurance offers four major categories of coverage:
- Medical treatment.
- Wage replacement.
- Vocational rehabilitation.
- Death benefits.
We’ll discuss each of these benefits in more detail below.
Medical Care Benefits
So long as your employee’s injury or illness is related to their work, your small business’s Workers Compensation policy will cover the medical costs. This may include…
- Surgeries.
- Hospital stays.
- Doctor visits.
- Treatment.
- Medications.
- Medical equipment (e.g., a wheelchair or crutches).
The treatment has to be reasonable, necessary, and related to the work injury in order for the insurer to cover the costs. Generally, this excludes investigative treatment or therapy. Also, your policy will usually stipulate which healthcare provider your employee must go to for covered treatment.
Wage Replacement Benefits / Disability Benefits
If an injury keeps your employee out of work, they may qualify for wage replacement benefits, so long as they fall into one of the following types of disability:
- Temporary total disability. This happens when an injury prevents an employee from working at all but only for a certain amount of time.
- Temporary partial disability. This prevents an employee from doing some of their work duties for a brief amount of time.
- Permanent total disability. To fall into this category, the employee must not be able to work at their current job or similar jobs anymore.
- Permanent partial disability. In this case, the damage is permanent, but it only partially impedes an employee’s ability to work.
The amount an eligible employee receives is based on what they earned before their injury. Usually, they can receive two-thirds of their wages. Plus, they won’t have to pay state or federal income taxes on that amount.
Vocational Rehabilitation Benefits
These Workers’ Compensation Insurance benefits pay for therapeutic care (e.g., physical therapy) so your employees can make a full recovery from their occupational injuries or illnesses. If your employee needs special training to help them return to work or to become qualified for a different job, these benefits can cover those costs as well.
Death Benefits
If an occupational injury or illness results in an employee’s death, their family or dependents can receive certain benefits. These include…
- Funeral and burial expenses.
- Financial support (i.e., a percentage of the deceased worker’s earnings).
Some states place restrictions on the relationships that qualify for these benefits. For example, partners must be married in some states to receive death benefits. In others, stepchildren or children born outside of marriage might not be eligible for benefits.
Employer’s Liability Insurance: The Oft Overlooked Perk of Workers’ Comp Coverage
As we mentioned earlier, Workers’ Comp is designed to safeguard your employees. However, many WC policies include a second part – Employer’s Liability Insurance – that primarily protects employers. You don’t pay extra for this coverage, either. It’s usually already included in your Workers’ Comp rates. (You can learn more about the factors that affect Workers' Comp costs in our Workers' Comp Insurance Quote Analysis.)
If you live in a state that has a monopolistic fund (e.g., Ohio, North Dakota, West Virginia, Wyoming, or Washington), you must purchase Workers’ Comp through the pool. That also means Employer’s Liability coverage may not be included in your policy, but you can usually add it on.
Here’s how the coverage works: An employee could waive their Workers’ Comp benefits, which would give them the right to sue your business for their work injury or disease. When that happens, Employer’s Liability Insurance can help pay for your business’s litigation costs (up to your policy’s stated limits). These costs may include…
- Attorney fees.
- Settlements.
- Damages or judgments if your business is found liable.
- Other court costs (e.g., docket fees, witness expenses, etc.).
Though Employer’s Liability cases are rare, they can be devastating. To reduce the likelihood of occupational injuries (and the risk of liability lawsuits), be sure to check out our post How to Prevent Workers’ Compensation Claims.
This post is part of an ongoing series on Workers’ Compensation Insurance and the high cost of occupational injuries. Stay tuned for more on how to handle work injury claims, adhere to state Workers’ Comp laws, and find affordable coverage!