The Small-Business Owner's Guide to Workers' Compensation Insurance

Chapter 1: Workers' Compensation Insurance: The Basics
Part 2: What Do Workers' Comp Benefits Cover?

As you know, Workers' Compensation Insurance is one of the few insurance policies regulated by the states. The other odd thing about this small business insurance policy is that it primarily benefits your employees. Of course, because 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 Benefits

Workers' Compensation Insurance offers four major categories of coverage:

  • Medical treatment.
  • Wage replacement.
  • Vocational rehabilitation.
  • Death benefits.

Below, we'll discuss each of these benefits in more detail.

Medical Care Benefits

So long as your employee's injury or illness is related to their work, your small business's Workers' Compensation policy may be able to 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, as 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 entirely, 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.

Wage replacement benefits usually compensate employees for two-thirds of their pre-injury wages.

Vocational Rehabilitation Benefits

These 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, too.

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.

Next: Employers' Liability Insurance: The Oft Overlooked Perk of Workers' Comp Coverage

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