Employers are legally obligated to provide a safe work environment. The complexity of most workplaces, however, means that not every hazard can be foreseen or prevented. Because of this, workers’ comp coverage is required in every U.S. state, with the exception of Texas. Workers’ compensation insurance not only safeguards your employees but protects your wallet and your business when accidents occur.
Workers’ Compensation Basics
Also known as workman’s comp, workers’ compensation insurance assures medical care and financial support to injured workers. It can also financially protect business owners from significant legal expenses should an employee file a lawsuit related to a workplace injury.
Though workers’ comp benefits and regulations vary by state, most policies cover traditional employees within your business in cases of occupational injury or illness. Workers’ compensation covers accidental injuries, such as slips, falls, and machinery-related injuries.
Insurance may also cover expenses accrued due to illnesses and ailments that develop over long periods of time. For example:
- Stress-related injuries
- Repetitive stress injuries
- Illnesses caused by exposure to toxins and chemicals
- Hearing loss
- Lung disease
- Heart disease
When an employee sustains a work-related injury, they can expect a variety of workers comp benefits. Typically, the insurance covers medical costs, including expenses associated with diagnosis, treatment, and ongoing care costs. Insurance will also provide disability payments (a percentage of their regular salary) and, dependent on the state and policy, cover rehabilitation and retraining.
Why do Businesses Need Workers’ Comp Insurance?
It’s the Law
Insurance regulations are set at the state level, and almost every state in the U.S. requires workers compensation insurance regardless of how high or low risk a business is regarding workplace injury.
Many states legally require any business with one or more employees to have a workers’ compensation policy. Texas is the only state in which compensation insurance is optional.
Sole proprietors, independent contractors, and partnerships aren’t required to purchase insurance to cover themselves unless they choose to or have non-owner employees.
Accidents Happen In Every Industry
No industry is immune to accidents, though certain industries have higher risks for occupational injury or illness. The injuries in these environments are often more common and more severe—even deadly. Businesses with high associated risks, such as roofing, equipment operations, or construction, often have more expensive policies.
Nonetheless, even industries at lower risk are susceptible to accidents or illness. Unexpected hazards or conditions can happen at even the smallest or calmest offices. Wet floors, uneven flooring, or loose wires, as well as ladders, can cause falls. An employee can be hit by equipment or suffer overexertion during routine tasks. These nonfatal injuries account for billions of workers’ compensation costs in low-risk businesses.
Better Benefits Lead to Higher Employee Retention
Like health insurance, workers’ comp provides employees with security in the face of unforeseen injury or illness. When businesses provide employees with safety improvements and proper workers’ comp coverage, employees understand that they are valuable. That added value increases retention and reduces turnover.
Workers’ Comp Protects Business Owners from Paying Out of Pocket
The cost of premiums and administrative costs of handling claims are the only out of pocket payments most businesses make. It is the insurer that pays the state-required amounts of compensation, taking on the legal payment obligations. In fact, most states prohibit business owners from paying any medical expenses for employees on their own.
Many Policies Cover Legal Fees and Settlements
In protecting businesses, workers’ compensation eliminates legal action for damages like pain and suffering. Workers’ compensation services were adopted to provide for injured or ill workers guaranteeing monetary aid but eliminating the right to sue an employer for the injury.
Even so, workers’ compensation insurance usually includes liability insurance as well. This can help pay attorney fees, court costs, and settlements or awarded judgments in business-related lawsuits.
How to Find the Right Workers’ Comp Plan
The state in which you run your business determines what policy options are required and available.
Monopolistic states, North Dakota, Ohio, Wyoming, and Washington, as well as Puerto Rico and the U.S. Virgin Islands, require business owners to use the state fund for workers’ comp. In these states, private insurers are not allowed to sell or oversee competing funds for workers’ compensation insurance.
States with a competitive state fund allow business owners to choose to use the state fund or to purchase workers’ comp from private insurance companies. In these states, it is essential to find the right plan for your business. When choosing the right workers’ compensation insurance, it is important to have the information you need with an agent knowledgeable in your state’s requirements and jurisdiction appropriate for your business.
Ensure Your Business’ Future With Workers’ Compensation Insurance
Regardless of state requirements, if an employee is injured on the job, you may be legally liable. The costs of a single claim can financially destroy a company. Workers’ compensation provides financial protection for handling these risks. A business that prioritizes workplace safety and plans for the unexpected protects both itself and its employees.
