Do I Need Workers Compensation Insurance and When Should I Get It?

The National Safety Council estimates 540 injuries occur in the workplace every hour. That translates to around 7 million work-related injuries each year.  

As an employer, part of your duty to those you recruit is to ensure their safety in the workplace. But accidents do happen. Therefore, you must consider how to care for your staff after an injury or illness while on-the-job.

If you’ve not heard of workers’ comp and you’re wondering, “Do I need workers compensation insurance?” then here’s a compact guide to bring you up to speed.

What Is Workers’ Compensation Insurance?

Workers’ compensation insurance refers to medical and wages benefits given to employees who suffer injuries or illness at work.

As an employer, you pay the necessary funds into the workers’ compensation fund at a state and federal level. Whenever an eligible employee suffers an injury and falls sick in the course of their work, they can receive the benefits.

Workers’ comp pays out no matter which party is at fault.  In return, an employee gives up the right to sue you for damages arising from injuries and illness.

Do I Need Workers Compensation Insurance?

Nearly every state (except for Texas) requires most employers to carry workers’ compensation. State law will govern workers’ compensation. The only exception is the federal workers’ compensation, which caters to federal employees.

Each state has different fine print around workers’ comp but the basics remain the same.

In many states, when you have only one employee, it becomes a must for you to carry workers’ comp. In other states, the minimum cut off for workers’ compensation rises to between two to five employees.

For large corporations, it’s possible to provide for their workers’ compensation insurance. However, such businesses need to apply with the state for this. Additionally, they will need to prepare to meet the strict requirements for self-insurance.

Can Employees Sue for Compensation?

Although workers’ comp is meant to help protect an employer from lawsuits by the staff, that is not always the case. Some limited exemptions can allow an employee to sue their employer for damages successfully.

If an employer acts in a way that injures their workers, some states do allow the staff to file a lawsuit. In such cases, an employee can seek punitive damages and further compensation for pain and suffering.

However, the burden will still lie with the employee to prove that their employer did indeed intend to cause them harm.

An employee can also file a suit if the employer does not have any workers’ comp coverage. In such cases, the employer stands not only to lose by paying the damages but also to receive severe penalties and fines from the government.

What Does Workers’ Compensation Cover?

Workers’ compensation policy only covers those injuries or illnesses that an employee suffers during their employment. Furthermore, an injury or illness does not have to happen only within the premises for it to fall under this category.

For example, if your workers are traveling on business and suffer an injury or fall ill, the policy will kick in.

If an employee suffers from repeated trauma that stems from doing the same tasks over and over, they can seek compensation. The same goes for occupational diseases an employee will suffer due to the conditions in the workplace.

What Workers’ Comp Does Not Cover

Workers’ comp will not cover any disease or injury that occurs while an employee is intoxicated or under the influence of illegal narcotics. Many states will also deny a worker coverage if there is evidence of misconduct.

Some of these instances include self-injuries, if the injuries occur as a result of a fight the employee started or if the injuries occurred while the employee was committing a felony.

It’s also worth noting that in some states, the injury or illness won’t receive coverage if it happens while the employee was violating company policy.

However, there is a thin line here as the court can still award compensation if it determines that the employer let such behavior slide or such behavior was a common part of the company culture.

Where Can Employers Get Workers’ Compensation?

Workers’ compensation is typically purchased as a stand-alone policy separate from your business owners’ insurance. The state will determine if you can buy workers’ comp from a private insurer or the state itself (or both).

In states where both will apply, you can turn to the state’s fund if you are unable to get coverage from private insurers.

For businesses in Wyoming, North Dakota, Ohio, and Washington, you can only source workers’ comp from the state-funded program.

What Benefits Do Employees Receive?

When an employee files a claim successfully, the average workers comp settlement will fall under one of two categories.

The settlement can be one where both the employer and employee agree is legitimate (known as liability stipulations), or both parties will agree to disagree on the legitimacy of the claim (known as no-liability stipulations).

The benefits an eligible employee can receive will depend on the injury or illness in question.

If the employee receives medical care, the policy will cover the costs of treatment plus medications. Should the worker need special equipment to deal with the injury or illness, workers’ compensation will cover that as well.

In cases where the illness or injury calls for medical and therapeutic care, an employee can expect compensation for it. The same will apply in cases where the injury or illness results in temporary or permanent disability.

But what about if the injury or illness leads to the death of your employee? Workers’ compensation will pay the benefit to the eligible next of kin.

Protect Your Employees

Despite the best efforts of employers to make the workplace safe, accidents do happen. It is therefore critical that as an employer, you factor in workers’ compensation to protect your employees should they suffer an injury or illness while on-the-job.

Before buying any insurance, ask yourself, “Do I need workers compensation insurance?” Enlightened answers to this question will better enable you to protect your staff.

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