A Guide To Workers Compensation Insurance

All 50 states have statutory schemes in place that create workers’ compensation systems and provide for workers’ compensation benefits as an employee’s exclusive remedy for work-related injuries.

Although the framework is different from state to state, workers’ compensation generally protects companies from potentially limitless tort liability for industrial accidents and occupational diseases, while expediting the delivery of benefits to injured employees regardless of fault.

What Is Workers Compensation Insurance?

Workers’ compensation insurance or simply workers comp is insurance that an employer secures to cover the benefits that it must pay to employees for work-related injuries and diseases. It pays monetary benefits to injured employees to compensate them for temporary and permanent disability associated with their work-related injury or disease.

Equally important is that workers’ compensation insurance supplies, at no cost to injured employees, medical benefits related to the work-related injuries. In general, this means that injured employees are furnished with a primary care physician and specialists when needed, hospitalization needs, medical tests, prescription drugs, physical therapy, and rehabilitation care. Workers’ compensation insurance also pays a portion of injured employees’ lost wages.

However, workers’ compensation insurance does not apply if the injured individual is not one of the policyholder’s employees. It also has no application if the employee’s injury did not happen at work; workers’ compensation is not health or medical insurance and it’s important to note the distinction between the different kinds of coverage.

Why Your Business Needs Workers Compensation Insurance

If you own a business, and that business hires employees, it’s important that you’re covered by a workers’ compensation policy. Just like your business has commercial property insurance to pay for the costs of theft or fire, or a commercial auto insurance policy to pay for the costs associated with a vehicle collision, it must have a workers’ compensation policy to pay for the costs of injuries that employees sustain in the workplace. In short, workers’ compensation insurance protects employers from the risk of workplace injuries and covers the costs associated with those injuries.

A business should have workers’ compensation insurance because:

  • It’s the law across most states. In fact, Texas is the only state that does not require employers to purchase workers’ compensation insurance.
  • It helps a business avoid serious financial harm. The amounts that an employer could be required to pay for potentially limitless tort liability for industrial injuries is staggering. A death claim could exceed millions of dollars and bankrupt an uninsured employer.
  • It gives employees a safety net when disaster strikes. According to U.S. Bureau of Labor Statistics, private industry employers reported 2.8 million nonfatal workplace injuries and illnesses during 2020. In addition to helping employers cover risk, workers’ compensation insurance helps employees too.
  • It protects a business from civil and criminal penalties. If a business fails to carry workers’ compensation insurance, it could face serious repercussions. These vary by state and can range from fines of up to $100,000 and up to seven years in jail.
  • It’s the right thing to do. Workers’ compensation systems arose as one of the great political compromises of the Progressive Era—injured workers gave up the right to sue employers for personal injury damages in return for less generous but more certain benefits. Workers’ compensation insurance holds employers to the terms of The Grand Bargain.

What Does Workers Compensation Insurance Cover?

Workers’ compensation insurance covers injuries or diseases that are work-related. An employer’s liability in this regard is broad in scope and can include a variety of scenarios. Injuries that occur in the workplace such as a slip and fall, a vehicle collision, or an industrial explosion are covered by workers’ compensation. Work-related illness are also covered. For example, situations such as an administrative assistant who develops carpal tunnel syndrome because of repetitive movements or a worker who falls ill from exposure to jobsite toxins or chemicals fall would fall under the umbrella of workers’ compensation coverage.

What Benefits Do Injured Workers Receive?

Workers’ compensation insurance generally provides four different types of benefits: medical benefits, wage benefits, vocational rehabilitation, and death benefits. Some of the specific kinds of benefits include:

  • Primary care physician medical care
  • Specialist medical care
  • Hospitalization needs
  • Medical tests
  • Prescription drugs
  • Physical therapy
  • Rehabilitative care
  • Lost wages
  • Temporary disability benefits
  • Permanent disability benefits

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HUB International

HUB International is a leading North American insurance brokerage that provides employee benefits, business, and personal insurance products and services.