What Is Workers’ Compensation Insurance?

February 24, 2022

Workers’ compensation insurance protects your business from lawsuits, and provides your employees compensation in case of workplace injuries.

As a business owner, you know that making sure your people are cared for is a priority. You also know that without workers’ compensation insurance coverage, the medical expenses tied to just one claim could have devastating financial consequences.

The total cost of work injuries in 2019 was $171.0 billion. This figure includes wage and productivity losses of $53.9 billion, medical expenses of $35.5 billion, and administrative expenses of $59.7 billion. This total also includes employers’ uninsured costs of $13.3 billion.

Cost per medically consulted injury in 2019 was $42,000. These figures include estimates of wage losses, medical expenses, administrative expenses, and employer costs.

What Are My Responsibilities As An Employer?

As an employer, you are responsible for making an effort to prevent illness and injury, reporting any injuries that do occur, and helping injured employees return to work. Nearly every state requires employers to carry workers’ compensation insurance, and each state sets its own requirements. Typically, workers’ compensation insurance is required as soon as the first employee is hired.

Are There Penalties For Not Having Workers’ Compensation Insurance?

Workers’ Compensation is regulated on the state level, and each state sets out penalties for employers who don’t have workers’ compensation coverage.

For example, in Massachusetts, employers operating without insurance are subject to civil fines and/or criminal penalties, and a STOP WORK order could be issued to their business. Civil fines can reach up to $250 a day, and criminal penalties include a fine of up to $1500, imprisonment for not more than one year, or both.

Workers’ Compensation Payouts

Workers’ compensation standards are upheld by individual states, and this has resulted in large discrepancies in compensation for identical injuries in different parts of the country.

The Office of Worker’s Compensation Program, housed in the U.S. Department of Labor, is only responsible for federal employees, longshoremen, and coal miners.

Don’t confuse workers’ compensation with disability insurance or unemployment income; workers’ comp only pays workers who are injured on the job. Disability insurance pays out regardless of when or where the insured is injured.

Did You Know Workers’ compensation does not cover unemployment. And unlike unemployment income or disability benefits, workers’ compensation is tax-free.

Workers’ Compensation Doesn’t Cover Everything

This is really a no-brainer, but sometimes we all need to be reminded. While workers’ comp covers most work-related injuries, it does have limits. Generally, workers compensation insurance does not cover injuries that happen at work because you, or your employees, are intoxicated.

Is Workers’ Compensation Insurance Enough?

Workers’ compensation insurance covers wage replacement and medical bills for employees injured on the job. To protect against other injuries at your place of business, you may need General Liability Insurance. This type of coverage protects the general assets of your company in the unfortunate event of damages to property or personal injury. There may be litigation costs associated with the damage or injury, but with GLI, you’ll be prepared.

What are the benefits of Workers’ Compensation insurance?

Workers’ Compensation insurance offers employers a number of benefits, including:

‍‍Protection from lawsuits
Workplace insurance benefits for their employees
Injury prevention training and education
Help getting injured workers back on the job

Accidents happen. Whether it’s a minor slip-and-fall, or something much worse, you need to make sure that you have the right coverage in place to protect your business and your employees. Imagine what the ramifications would be if an injury occurred, and you did not have workers’ compensation insurance. Could your business cover the cost of the employee’s medical bills or rehabilitation? What if an injured employee launched a lawsuit?

Hire the Best People

One way to avoid accidents on the job is to hire highly qualified individuals. If you need employees who can perform very physical tasks, consider adding a fitness-for-duty physical exam and a review of their medical history to your hiring process. This will help eliminate candidates who have known back or joint problems and those who can’t lift heavy weights and otherwise perform the required job duties. Include a drug test to your hiring process, as well, to reduce the chance of employees coming to work under the influence.

Add a Safety Program

A safety program for management and staff is an excellent way to make the workplace much safer and reduce workers’ comp claims from on-the-job accidents. Employees should be trained on a regular basis on how to perform their job safely, how to avoid accidents, and what to do to keep their work environment as safe as possible.

Your safety program should also include a process for collecting information after any accident, whether there was an injury or not. This will help you identify problems and avoid future accidents. Staff and management will need to be trained on the process and follow it to the letter with every accident.

Create a Safety Committee

Another piece of the safety puzzle that will help reduce accidents and workers’ comp claims is to form a safety committee. Members of the committee should include both management and general employees. This group will come together monthly or quarterly to discuss safety issues in the workplace. Their job is to identify and correct health and safety concerns before an accident happens.

When you involve your employees and really listen to them, you’ll find that they are filled with information you need to make your business safer. Committed and involved employees want to be safe on the job and avoid accidents. Let them share what they see and experience, and they’ll help you immensely.

Making your business a safer place to work not only leads to happier, healthier employees and higher productivity, it also lowers the number of accidents your employees have and ultimately your workers’ compensation costs. Take the steps needed today to hire the right people, teach them to stay safe, and listen to their input on how to maintain a safe working environment.

If you’ve got questions about your workers’ compensation coverage or need a quote for a new policy, contact us today.

Category: Workers’ Comp Insurance