Workers Compensation Help

Does your business meet employee medical needs? Learn what workers' compensation is and why it is important for business owners to purchase.

When you start a business there are many issues to consider, such as paying for inventory, finding clients, or marketing your brand. One issue you may not think about initially is hiring employees, if your business is a small self-run operation. However, as soon as employee hiring comes into play there are entirely new issues to worry about. One of those issues is purchasing workers' compensation insurance (also called workers' comp or workmans' comp).

Most states in the U.S. require public and private employers to purchase workers' compensation insurance for full-time employees, and some require it for part-time employees as well. Although, Texas and Oklahoma have much more relaxed Workers' compensation laws than other states. Therefore, there is a good chance you must purchase workers' compensation, if you have at least one employee and operate a U.S. business. However, purchasing workers' compensation is not a negative event. It can provide you and your employees with several important benefits. Understanding those benefits, as well as where and how to get workers' compensation insurance, is the key to protecting your business and operating it legally.

What is Workers' Compensation?

Workers' compensation is a means of protecting employers and employees. It provides funding when employees acquire work-related illnesses or injuries. Workers' compensation is federally mandated under most circumstances. Although, only a few specific workers' compensation programs are operated at the federal level. Those programs are primarily provided to protect federal employees. Workers' compensation requirements for other public and private workers are typically overseen by state agencies.

Workers' comp is essential for employee well-being and employer protection. Approximately 2.8 million nonfatal injuries occur in U.S. private sector workplaces annually. If workers' compensation did not exist, injured employees might have to miss work without pay. Thus, many of them might sue their employers for injuries sustained and lost wages. The insurance provides employers with peace of mind and legal protection. Meanwhile, injured employees are able to focus on their recovery processes with fewer financial or legal worries.

What Does Workers' Compensation Cover?

One of the main purposes of workers' compensation is to pay for wages lost by employees who cannot work while sick or injured. If an employee is killed on the job, workers' comp also covers burial expenses. Similarly, burial expenses are covered when a death occurs later but as a direct result of a workplace-acquired illness or injury. Medical and ongoing care costs are also covered by workers' comp. Such expenses may include:

• Emergency Room Visits

• Doctor Appointments

• Surgical Bills

• Medication Costs

• Physical Therapy

• Ongoing Allergen or Chemical Exposure Treatment

Some workers' compensation cases involve employees who are categorized as disabled. Temporary or permanent disability caused by a workplace injury or illness is quite common. In such cases, the ongoing care expenses and lost wages are covered, at least in part, by workers' comp. However, benefits are also dependent upon eligibility for certain assistance programs. For example, Social Security Disability Insurance (SSDI) may cover some expenses for disabled employees.

What Are the Qualification Requirements for Workers' Compensation

Workers' compensation eligibility requirements for business owners vary by state. Your employees may not require workers' comp coverage under certain circumstances. For example, some states do not require workers' comp for people in certain professions or circumstances, such as:

• Family Members of Business Owners Who Are Under a Certain Age

• Real Estate Agents

• Farmhands

• Insurance Agents

Some states also place minimum requirements on how many employees a business must have before workers' comp is necessary. Therefore, it is not always required for extremely small businesses. Also, large businesses in some states are not required to participate in state-run workers' comp programs. Instead, business owners have the option for their companies to self-fund their own in-house workers' comp programs. 

There are many legal requirement variations between the states. New business owners must check requirements in their states to determine what the state-specific qualification requirements are. Business qualifications for workers' comp requirements also become more complicated when state lines are crossed. If a business has employees in two or more states, the owner must check legal requirements in all states involved.

If a workplace offers workers' compensation, employees must also meet qualification requirements to make claims. First, employees must obtain their illnesses or injuries because of workplace accidents, contamination or other work-related issues. Second, the employees must file worker's comp claims in a timely manner. Most states have specific time limits on filing such claims.

What Types of Providers Offer Workers' Compensation Insurance?

Workers' compensation insurance providers vary by state. State laws dictate coverage sources. For example, some states have workers' compensation funds offered as state government programs. Certain states require employers to use those programs. Those are known as monopolistic state insurance fund programs. Others offer the option of purchasing workers' comp coverage from private insurers or from the state. Those are competitive state insurance fund programs. 

In states where state-offered funds do not exist, private insurance companies are the primary sources for workers' compensation coverage. However, employers in some states are also allowed to self-insure. To do so, companies must be large enough to support self-sustained workers' comp systems. Some states also have other eligibility requirements business owners must meet for self-insuring.

What Determines the Cost of Workers' Compensation Insurance?

Workers' compensation coverage costs are not easy to estimate. There is no simple average number. Costs are dependent upon business sizes and payroll. They also vary by geographic location, and industry. Additionally, claims history matters. For example, in 2020 Progressive Commercial charged an average of $86 per month for small business owners. However, its rates increased for owners who had recently filed claims.

In some states, your options are limited. You may have to sign up for your state's workers' compensation fund. If private insurance companies are an option, shop around. Also, minimize your claim risks to make your company safer. Insurance companies often reward safer companies with lower rates. You can improve safety with employee training programs, proper property maintenance, or clearly listed safety tips and standards for your employees. Then you can obtain the best possible workers' comp insurance rates.