In this guide, we aim to answer all of your questions about Worker’s Compensation Coverage, including who needs it, what it covers, and we also provide you with useful links where you can obtain the most up to date information about the legal requirements in your state.
When you buy a worker’s compensation policy, you get coverage for medical care, pharmaceutical, and any rehab costs for your employees’ work-related illnesses or injuries. It will also cover a portion of the individual employee wages while they are not working. This is not a substitute for any form of medical or health coverage, and it will only cover illness or injury sustained while working or that is considered to be work-related.
With the exception of Texas, it is written into state law that employers need to buy worker’s compensation coverage. We will cover the specific state requirements shortly, but in most states, where there is at least one employee, there is a need for the company to buy this coverage. If you ignore these laws, you could risk incurring severe penalties that range from a fine, right the way through to a potential prison term.
There are many ways that worker’s compensation coverage will benefit your business.
There are also a number of additional coverages you can add-on to a worker’s compensation policy. In some cases, coverage will be included as standard, and in others, you will need to pay a little more for these benefits.
Again, the cost of buying worker’s compensation coverage will fluctuate from one state to the next. There are a number of variables to consider as well. These include the number of people you employ, the industry you serve in, the safety record of your business, and more.
If you are concerned about managing the cost of a worker’s compensation policy, you no longer need to make a large down payment on this type of policy. Thankfully, you can make payments of premiums in smaller bitesize chunks, making it more easily afforded by your business.
As we’ve already covered, the guidelines and laws relating to worker’s compensation coverage are set individually on a state-by-state basis. One of the main reasons for this is that each state has their own risk profiles and economies to consider. Although there isn’t a great amount of fluctuation from one state to another, there are a few states that have quite different laws.
The two main beneficiaries of a worker’s compensation policy are your staff and your business. Firstly, your employees get essential protection by this coverage, which will pay for their medical expenses and a portion of their wages. Secondly, if an employee decided to sue you as a result of their injury or illness, the cost of the lawsuit and any damages will be covered as well.
Again, it’s important to note that state laws vary, and you should always read the finer details before buying coverage. Generally speaking, the below instances and events will not be covered by worker’s compensation insurance.
While you may not be legally obligated to buy coverage as an individual who works alone, there may be instances where a client or business partner may request that you do. If you do not hire anyone else to work with you, and you only use contractors, friends, and family, you may legally need to buy worker’s compensation coverage.
If you are in any doubt, pick up the phone and talk to a local commercial insurance expert. They can give you answers to your questions and a quote for worker’s compensation coverage at the same time.
If you do not buy the right worker’s compensation coverage for your business, there are a number of consequences. The most severe of which is to jeopardize the operations of the company; an action that could lead to your business being shut down. While this may seem extreme, if an employee sustains an injury and your business does not compensate them for this injury, this is one of the potential actions that can be brought about against you. In addition to this, your business may incur fines, which can range between $50-$100 daily.
In the vast majority of states, a company that has more than one employee will need to buy this coverage. Texas is one exception to this rule, and there are some other states that only request employers with three or more employees need to buy this coverage.
There are a number of key factors that are taken into account when working out the cost of a worker’s compensation policy.
Because every business will face different risks, your worker’s compensation coverage will be calculated on a premium that directly relates to your industry. Your insurance company will take the individual classification rate of your industry and multiply this with the total wages you pay out to your staff. This calculation is called the average performance premium.
When the average performance premium falls below $30,000, your business is considered to be a ‘small employer.’ In the event an employee is injured at work, your premium should not be impacted upon by the cost of the claim.
However, if your average performance premium is more than $30,000, then your business will be considered to be a ‘medium employer’, and any premiums you need to pay will be experience-rated. This means that in the event of a claim for an illness or injury, your premiums will be impacted.
If you are a subcontractor who hires employees above the state-imposed level for worker’s compensation requirements, then you will be required to have worker’s compensation coverage in place. This is the case, even when the individual subcontractor carries worker’s comp coverage, if they do not qualify to be an independent contractor, then you are responsible for providing coverage for them.
Out of every state in the US, Texas is the ONLY state that does not have a state law that requires businesses to take out Worker’s Compensation Insurance. While the majority of states will require companies that have more than one employee to buy this coverage, this number can range between 1-5 employees. The penalties for worker’s compensation coverage will also vary from one state to the next.
To check the coverage requirements for your state, use this link to the NFIB website. Because this website is not updated on a regular basis, it is essential you talk with a commercial insurance agent to ensure you are compliant with the law.
It is essential that business owners comply with their local state laws where insurance is concerned. Aside from facing the risk of being shut down or fined, there are so many reasons why your business and your staff will benefit from having worker’s compensation coverage in place. With the addition of monthly premiums, paying for this insurance is now more manageable than ever before too.
Always talk with a local commercial insurance agent first and review the policy terms and limits when you get a quote for worker’s comp coverage.