Workers Compensation Information
Workers’ compensation insurance protects employees under state laws and can provide compensation for medical care, death, disability and vocational rehabilitation benefits to workers for work-related injuries and illnesses. Coverage premiums of workers’ compensation are based on the employer’s payroll, the type of work your employees do and the company’s experience modification rating.
Workers’ compensation insurance is legally mandated in most states in the United States. State laws determine when an employer needs to provide workers’ compensation insurance; it typically depends on the number of employees.
How Workers’ Compensation Works
If an employee develops a work-related illness or injury, the resulting damages and losses can be immense. Adequate workers’ compensation coverage can make a sizable difference as your employee and your company attempt to recover and manage the aftermath. Specifically, most policies will include coverage for the following:
Medical expenses—This coverage can help pay for the treatment and rehabilitation of an employee who has been injured or developed an illness.
Wage replacement— This coverage can help an employee recoup their wages if they are injured or become ill and are forced to take time off work.
Legal fees—If an injury or illness leads to a lawsuit, this coverage can help pay your business’s court costs.
Disability benefits—This coverage may help with benefit costs and settlements for an employee who develops a permanent disability following an incident.
Death/dependent benefits—In the event of a work-related death, this coverage can provide financial assistance to an employee’s family.
Workers’ compensation functions similarly to other insurance policies in that a business agrees to pay a premium in exchange for coverage. If a business is carrying workers’ compensation insurance and an employee suffers a work-related injury or illness, a workers’ compensation claim may be filed. This process varies by state, but it typically involves providing information to the employee about their rights and submitting the necessary information and documentation to the insurance company. State-specific resources are generally available (e.g., Pennsylvania Workers’ Compensation Services website) and your agent can provide additional information.
How Workers’ Compensation Insurance Is Calculated
Insurance providers must weigh several factors when determining the cost of workers’ compensation coverage. These may include:
Employees’ duties —The National Council on Compensation Insurance and state officials are responsible for assigning a workers’ compensation class code to all employees based on their duties.
Total payroll—As a general rule, the higher your business’s payroll, the more workers’ compensation coverage you will need.
Company history—Providers will consider your organization’s experience modification number, which is determined by analyzing the past history of incidents and future risk levels.
The location of your business and its number of employees may also be factors that affect workers’ compensation premiums.
It’s important to know that the cost of your policy may vary from that of another business. Contact an agent to determine what your business’s rate will be.