The basics
What is workers’ compensation?
If you or an employee gets hurt on the job, workers’ comp can help. Often referred to as workman’s comp or workers’ comp, workers’ compensation is a type of insurance employers need to carry in order to help injured employees pay for medical costs and lost wages due to job-related illness and injuries.
It also protects employers from being sued by employees for workplace conditions that might have caused the illness or injury through the employer’s liability coverage. Think of getting workers’ comp as a way to protect your employees, your business, and yourself.
Who needs workers’ comp?
Employers are required by law to carry workers’ comp insurance it in almost all states.
But you should buy a workers’ compensation policy whether you’re required to have it or not. Just because you’re not covered by insurance doesn’t mean you won’t have to pay the bills if something happens. And purchasing workers’ compensation becomes more even more important when you work in a dangerous industry, like construction.
How does workers’ compensation work?
When an employee gets hurt or sick on the job, your workers’ compensation policy will kick in to help cover their wages and provide medical benefits until they are fully recovered.
If an employee is unable to return to work, it may provide them with long-term benefits. Workers’ compensation also protects your business from legal exposure.
It doesn’t matter if you have one employee or 25 employees. You are responsible for any employee who suffers a job-related injury or illness.
What does it cover?
Workers’ comp covers illnesses and injuries that occur as a result of duties performed at work or on the job. It’ll also cover services required to help an employee recover and return to work.
Claims examples
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- An injury, such as Carpal Tunnel Syndrome, due to long hours using a keyboard for design or data entry
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- An employee who injures their back from lifting anything from printer paper to heavy equipment
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- An injury from a fire or explosion
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- An injury from slipping on a wet surface
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- An injury tripping over cords at a photoshoot
- A car accident on the way to visit a client or make a bank deposit
Audits
Workers’ compensation policies are audited at the end of each year to make sure the premium (price) is correct. Basically, you’re charged a premium at the beginning of the period based on your estimated payroll for the year. The audit double checks that the estimate was correct and adjusts it accordingly.
Think of it as a good thing: you end up paying exactly what you should. Nothing more and nothing less.
Coverage highlights
- Attorney’s fees
- Court-awarded settlements or judgements
- Witness fees
Price factors
How much does workers’ comp cost?
Because most states regulate workers’ comp, the price can vary. As a rule of thumb, each classification (type of job) is assigned a rate per $100 of payroll, and the rate is a percentage of that. There are a few factors that cause the price of workers’ comp to vary, such as:
The kind of work you do
Some industries are more dangerous than others. The higher the risk, the higher the premium (price). A construction contractor will probably pay more for workers’ comp than a designer.
Where you live
Because most workers’ compensation rates are set by the state, some are more expensive than others.
The number of claims your industry has filed
If other people in your industry haven’t filed many claims, insurance companies will consider the profession to be “low risk”, which, in turn, lowers the price of the policy.
Check out our workers’ compensation insurance cost analysis to learn more.
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