Workers’ compensation basics for employers
Workers’ compensation insurance protects your business and employees if one of your workers becomes sick or injured while on the job – and it’s a requirement for employers in almost every state. But worker regulations in each state are different, and navigating the nuances can be tricky unless you’re familiar with the basics of workers’ compensation law.
As an employer, it's your responsibility to provide employees with a safe work environment, which means you can be held responsible for their occupational injuries, too. Unfortunately, despite a business’s best efforts to take precautions, workplace accidents and illnesses can still happen. When employees experience workplace accidents, injuries, or illnesses, workers’ compensation insurance can help cover:
- Medical expenses
- Lost wages
- Disability benefits
- Death benefits
Workers’ comp can also cover an employer’s legal expenses if an employee decides to sue for an accident or injury that happened while on the job.
Whether you’re a longtime business owner or just getting established, here are the workers’ compensation basics that every employer should know.
Almost all employers are required to have workers’ comp
Nearly every state requires workers' compensation insurance. Texas is a notable exception, but businesses that opt out of coverage in the state are still required to notify their government agency and employees.
In many states, employers are required to carry a workers’ compensation policy even if they only have one part-time employee. Other states' mandates don't kick in until the business has hired a certain number of employees. Either way, you should know your state's requirements so you can comply accordingly.
Failure to carry coverage can result in serious fines and even jail time. Learn more about workers’ compensation laws in your state.
How much does workers’ comp cost?
The cost of workers' compensation coverage varies depending on your location, payroll, number of employees, and other risk factors. Insureon’s workers' compensation insurance cost analysis can give you an idea about rate trends and factors that influence your premium.
Properly classifying workers will save you money
No one wants to pay more for coverage than they have to, but what many small business owners may not realize is that workers classification codes have different prices attached to them. These codes denote occupational risk for each type of job. The riskier the job, the more it costs to insure that professional. You can look up these codes on the National Council on Compensation Insurance (NCCI) website.
Make sure you take the time to properly classify your employees, so you don't end up paying more for your coverage. For instance, it wouldn’t make sense to categorize everyone at a construction business as carpenters (a higher-risk profession) if it also employs clerical staff (a lower-risk profession).
Workers’ comp can help you avoid lawsuits
Many years ago, the only way injured workers could receive compensation for their work injuries was to sue their employers. Unfortunately, the cards were often stacked against these workers – employers could essentially claim the worker had it coming by taking the job in the first place.
Fortunately, global attitudes started shifting in the late 1800s and early 1900s, and eventually, the workers' compensation system was developed. In exchange for occupational injury compensation, employees waived their right to sue employers. Today, this is known as the exclusive remedy rule. In short, if an injured employee accepts a workers' compensation insurance settlement with an exclusive remedy rule, he or she forgoes the right to sue you over the same injury.
Workers’ compensation can’t protect your business from every lawsuit related to workplace injuries, but it will in most instances. The laws vary from state to state, and there are some exceptions. For example, if a worker is injured because an employer has been irresponsible or caused intentional harm, the employee could sue for pain and suffering.
Workplace safety affects your workers’ comp premium
Workers' comp premiums are determined by several factors, including:
- Your payroll
- The type of work your employees do
- Your claims history
That last point is critical because part of the workers' comp premium calculation depends on your "experience modifier." This factor compares your actual losses to the expected losses for all members of your industry. As you might have guessed, the fewer claims you have, the lower your premiums will be. The best way to cut down on claims? Make workplace safety a priority.
Train employees on how to properly do their work and provide them with the necessary safety equipment. Discover more tips in "How workplace safety can save a business money."
Compare quotes from trusted carriers with Insureon
Complete Insureon’s easy online application today to compare quotes for workers' compensation and other types of insurance from top-rated U.S. carriers. Once you find the right policy for your small business, you can begin coverage in less than 24 hours.