Workers’ Compensation 101

How does workers’ compensation insurance work?

When an employee gets injured at work, they should report the injury to their employer and then file a workers’ compensation insurance claim.  From there the claim goes to the insurance company where it is determined what type of benefits are required and the injured employee can receive the care they need.

Depending on the state you live in, there may be laws that dictate how much and what type of benefits you are entitled to. Typically, workers’ compensation insurance covers around two-thirds of an employee’s wage, but it can also cover things like:

• Medical care
• Retraining costs
• Compensation for any permanent injuries
• Benefits to survivors
• Wage replacement for money lost while injured
• Medical treatment of the injury
• Vocational rehabilitation if necessary
• Other benefits to certain workers (e.g. coal miners) or their dependents

Is my business required to have workers’ compensation insurance?

Workers’ compensation insurance is federally mandated, and most states have laws that require a business owner to have workers’ compensation insurance. To make sure that your business is compliant with the laws, consult with your independent agent. They can help to ensure that your coverage meets the laws for your state and that your needs are covered properly.

If you happen to do business in a state that does not require you to carry workers’ compensation insurance, you may still want to consider it. Workers’ compensation insurance can protect you and your business from lawsuits if an employee were to be injured on the job and can aid in paying out claims you would otherwise have to pay out of pocket.

What types of injuries are typically covered by workers’ compensation insurance?

It depends on the state you do business in but generally, workers’ compensation insurance covers injuries that happen during employment, whether the employee was doing their job safely and properly, or if it was due to your work environment.

This doesn’t mean the injury has to happen at your regular workplace. Someone can be traveling for a conference or running an errand and still be covered.

Injuries that usually qualify for workers’ compensation insurance include:

• Falls
• Trauma, like a repetitive strain or stress injuries
• Occupational diseases, including cancer

Who pays for workers’ compensation insurance?

As the employer, you would be the one paying for workers’ compensation insurance by paying your premiums on the workers’ compensation insurance policy. If an employee files a claim, then your insurance company pays out the benefits.

How much is workers’ compensation insurance?

Like any type of insurance, the cost really depends on your business, industry, and the type of work that your employees perform.

Factors that can impact your workers’ compensation insurance cost include:

• Annual payroll amount: The smaller your team, the lower your premium.
• The “risk class code” of jobs being performed: (Some jobs are riskier than others, like construction, for example.)
• The overall rate of injuries within your industry
• The rate of injuries within your state
• Your company’s claims history: (The safer your business, the less you may have to pay overtime, and vice versa.)
• Inclusion/exclusion of owners or officers: Some states allow corporations to exclude owners and/or officers from coverage, which can lower the price of premiums.

The average cost of workers’ compensation insurance is around 1.4 percent of a person’s total compensation. So, if one of your employees makes $75,000 a year, you can expect to pay in the ballpark of $1,050 a year on workers’ comp insurance.

For a more accurate estimate, it’s best to reach out to your independent agent and talk to a workers’ compensation insurance specialist. They can get you a quote that is customized to your needs and that best fits the requirements of the state you do business in.

How do I get a worker’s compensation insurance policy?