Workers' compensation insurance for small businesses
What is it?
Workers’ compensation insurance protects both the business owner and its employees. When employees are hurt on the job, workers’ compensation insurance provides them with some of their lost wages and can cover medical care costs, disability benefits, and rehabilitation if needed. It can also provide benefits to families in case of workplace death.
Moreover, workers' compensation insurance normally protects companies from employee lawsuits related to these injuries or illnesses by restricting employees on when they can sue their employer. Without workers’ compensation coverage, a major workplace injury or illness could result in large medical expenses and cause severe financial harm to a business. On the other hand, with workers' compensation coverage, employees receive benefits regardless of who is at fault.
Who needs it?
Most states require workers’ compensation insurance for companies with employees, including small businesses. Some states have exemptions; for example, many states do exempt employers with only a few employees from mandatory coverage laws. However, since most personal health insurance plans do not cover work-related injuries, many business owners prefer to get workers' compensation insurance to avoid financial distress and lawsuits - even if their business qualifies for an exemption.
What is covered?
Workers’ compensation insurance pays for many medical costs related to work-related injuries, rehabilitation, disability, and lost wages for employees. It may compensate a family after a work-related death.
An employee’s benefits will depend on the type and severity of the injury or illness, state requirements, and the employer’s workers’ compensation policy. Therefore, it is important to review the specific policy that is purchased and the state requirements to understand exactly what is covered.
Covered costs usually include:
- Medical costs: These typically include the costs for treating injuries, such as doctor appointments, surgery, and medication, and might also include medical equipment like wheelchairs.
- Rehabilitation: Benefits often cover physical therapy when a recovery period is needed.
- Disability and lost wages: Lost wages can be partially replaced if a staff member is unable to work. Benefits can be considered for partial or total disability as well as temporary and permanent disability.
- Survivor benefits: If an employee dies because of a work-related injury, workers’ compensation can provide the employee’s family with financial support to compensate for lost income and generally covers some funeral expenses.
Workers’ compensation payments are paid if the employer or insurance company confirms that the injury or illness was work-related. If the insurer or employer rejects the workers’ compensation claim, a workers’ compensation judge makes the final decision.
Workers’ compensation insurance typically covers certain illnesses and occupational diseases contracted as a result of employment. Furthermore, workers’ compensation covers injuries employees may sustain from events that occur while they are working.
Traffic accidents are a leading cause of workers’ compensation death claims and are usually covered whether the accident occurred in a company car or the employee’s own vehicle during a work-related trip. Accidents driving to and from work are not covered. Many states also exclude workers’ compensation coverage if the injured person was intoxicated and that contributed to the injury. If an injury happens during a physical altercation, workers’ compensation may not cover the injuries.
Who pays the insurance premium and files the claim?
Employers pay for workers’ compensation insurance for their employees. If your business operates in multiple states, your policy must meet the requirements for all states in which it operates.
Employees are required to report the injury to their employer within a certain time frame of being injured in “the course and scope” of the job. The employer files a workers’ compensation claim with its insurance company in order for benefits to be awarded to the employee.
Is workers’ compensation the same in every state?
Rules governing workers’ compensation policies are established by state laws and court decisions, which regulate the benefit amount, covered injuries and illnesses, the method of evaluation of injuries and illnesses, and the method of providing medical care. States decide whether workers’ compensation insurance is provided by state agencies and private insurance or by the state alone. States also establish how claims are to be handled and the way that disputes are resolved. To learn about workers’ compensation requirements in each state, visit each state’s workers’ compensation website.
Where can you get it?
Workers’ compensation insurance must be purchased as a separate insurance policy. It is not part of your Businessowners’ Policy.
Each state has its own rules about where employers can buy workers’ compensation insurance. In a few states, all employers must buy their workers’ compensation insurance from a state monopoly insurer, known as a state fund. In other states, insurance may be purchased from the state fund and/or from private insurers.
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