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Today, we’re delving into the specifics of workers’ compensation insurance. What is workers’ comp? Why is this insurance necessary for both employees and employers? How do requirements differ between states, and how do I ensure I’m following the claims process correctly? Don’t worry, we’ll cover everything you need to know in this article (and there’s a lot to know). Whether you’re a small business or a large corporation, state laws require you to invest in workers’ compensation. To make sure you’re fulfilling your responsibilities and protecting your business, read on!
What is workers’ compensation insurance?
Similar to medical insurance or any other form of liability insurance, workers’ compensation insurance serves to protect both employers and employees in the event of an unfortunate accident or injury. When unexpected injuries occur, workers’ compensation can help to cover medical costs and make up for lost wages. Workers’ compensation can cover a host of injuries, ranging from chronic injuries caused by repetitive motions to loss of a limb. Illnesses caused by exposure to certain chemicals or harmful materials, other long-term impairments, and even death are covered by workers’ compensation. Workers’ compensation protects both employees and employers. In fact, some consider workers’ compensation to be more beneficial to employers than employees, since the insurance protects business from litigation from injured employees and claims they do not have money to pay for.
Any activity performed in the course of an employee’s work which results in injury is covered under workers’ compensation, even if the injury was caused by an employee’s carelessness. Workers’ compensation can even cover employees who are not on-site or who are traveling for work (including conferences and after-hours work events). However, injuries which occur during a break from work often are not covered. Injuries incurred while under the influence of drugs or alcohol are not covered by workers’ compensation, and intentional injuries (when proven) or injuries incurred by fighting are not covered by workers’ compensation. Common injuries which workers’ compensation cover are: slips, falls, twisted ankles, sprains, strains from heavy lifting, and injuries from machinery.
State by State
Every state—barring Texas—has its own requirement for businesses and employers concerning the level of coverage needed for their employees. States are quite specific about their workers’ compensation requirements, including coverage, medical services, and benefits. As well, standards can vary by the industry and size of the business. Failing to carry the required workers’ compensation insurance may result in having to pay for both employee benefits and imposed penalties out-of-pocket. Here’s a short rundown of important state requirements:
In California, failing to provide employees with workers’ compensation is a criminal offense, with up to one year of prospective jail time, a minimum fine of $10,000, or both. Further, the fine for uninsured employers can reach as high as $100,000. Even if a business only has a single employee, they must carry coverage for the individual. While sole proprietorships may opt out of the insurance (which is common in most states), most businesses will need to purchase coverage from a commercial provider, state-administered fund, or self-insure.
Illinois requires workers’ compensation for every employer, regardless of the work situation, number of employees, or level of employment (i.e. part-time, full-time). Even employees who are family members must be insured, except in select cases. Illinois has no state-administered fund. Any employer who is found to have failed to provide workers’ compensation will be compelled to pay a $500 fine for each day of noncompliance, along with a fine of at least $10,000.
There are a few states in which businesses must purchase workers’ compensation insurance from the state fund. Those states are North Dakota, Ohio, Washington, and Wyoming. The state fund does not extend to liability coverage, which protects against litigation from injured employees. Extra coverage will need to be purchased by businesses to ensure they are fully covered in the event of an accident.
South Carolina requires workers’ compensation when employing four or more people, including minors and seasonal workers. Employers with less than $3,000 in total annual payroll are exempt from this requirement, regardless of their quantity of employees. Railroad companies, agricultural employees, textile hall corporations, and select commission-based real estate agents are exempt, as well.
Workers’ compensation is a “no fault” system, which means an employee does not need to prove fault in relation to their injury in order to receive compensation.
By Occupation
Certain high-risk occupations carry higher premiums, as there is an increased likelihood of being injured on these jobs and a higher number of claims filed within these industries. The most high-risk occupations and industries are:
- Construction
- Corrections
- EMT
- Carpentry
- Firefighters
- Nursing
- Police Officers
- Truck Drivers
- Taxi Drivers
- Heavy Equipment Operators
- Food Services
- Manufacturing
- Retail
These occupations involve dangerous situations, such as exposure to danger from fire, violence, and disease. These occupations might also include repetitive motions—such as hammering or lifting—which can cause stress injuries, leading to chronic pain and eventual impairment. Therefore, insurance providers are more likely to charge higher premiums for employers operating within these corresponding industries.
Claims Process
The claims process should be straightforward, but minor mistakes can result in delays which prevent injured workers from receiving the medical care they need. Therefore, it’s important employers follow the correct protocol stipulated by their workers’ compensation insurance provider. If you do not have a dedicated human resources team, then having at least one individual within the organization who understands the claims process will go a long way toward ensuring everything is handled smoothly.
Most often, you’ll begin by determining whether the employee has an immediate medical need which requires attention to be remedied. After asserting there is indeed a medical need, a formal claim should be prepared. Ideally, this form will be completed by both the employer and employee. Next, the employer or human resources should give the claimant a comprehensive overview (not unlike this one!) concerning the claims process and how they should seek medical care. During this time, you will also inform them of how their wages may be supplemented, if the claim is approved (which allows the employee to plan their finances).
The workers’ compensation claim should be filed promptly, within twenty-four to forty-eight hours of the initial injury or illness. Illnesses which have occurred over time due to prolonged exposure to a hazardous material within the workplace do not apply to this statute. As an employer, you should keep in regular contact with your workers’ compensation insurance provider until the claim is processed. If the claim is approved, inform the employee they are free to seek further medical care and return to work (according to their medical provider’s recommendation). If the claim is denied, inform the employee of their option to demand further review.
Closing
Now you have the essential information you need to stay within the bounds of your state laws and protect your employees. If you do not live in a state which requires investment in a state-administered fund, finding the right workers’ compensation insurance is the next step! That’s where we come in! Everyone here at Abri Insurance is eager to assist you in your search for the best coverage. Come back here to read the latest news and discover more about how to make the insurance industry work for you! Thanks for reading! Until next time!