Protect your business from liability and offer a safety net for employees. Workers’ compensation insurance provides you with affordable coverage to protect your workplace against potential losses due to accidents or employee lawsuits.
Workers’ Compensation Defined
Workers’ compensation insurance is a type of business insurance that provides medical expenses, lost wages, and rehabilitation costs to employees who are injured or become ill in the course and scope of their job. It also pays death benefits to families or employees who are killed on the job.
How Does Workers’ Compensation Insurance Work?
Workers’ compensation insurance is purchased by businesses and is underwritten by insurance companies, and in some states, underwritten by publicly supported state funds. Workers comp eligibility is determined by state law, so make sure you know how this crucial plan might apply to your situation.
Unlike other types of insurance, there is really no difference in what is covered by policies. Workers’ comp coverage is statutory. However, there can be differences in rates.
How is the Cost of Workers’ Comp Determined?
Similar businesses in each state that exhibit comparable workplace injury patterns and costs are grouped into “classes.” Rates are determined for each class based on the prior five years of loss costs for all businesses within that class. This provides an equitable system where rates correspond with the actual loss experienced from each class of business.
For certain industries, such as contractors, daycare centers, and new businesses, finding affordable workers’ comp insurance can be difficult. Often, insurance companies are not willing to provide coverage for these businesses and they get thrown into the assigned risk pool. The assigned risk plan rates are generally higher than those in the standard market. Chastain Otis has years of experience helping these types of industries avoid the cost of the assigned risk pool.
Additionally, with large commercial accounts, there is some room for negotiation with the insurance company, unlike with personal insurance. If companies can package the insurance needs for the business with the same company, sometimes there are discounts for multiple policies. Chastain Otis can help find the policy that fits your business’ needs and budget.
Who is Required to Carry Workers’ Compensation Insurance?
Every state, with a small number of exceptions, requires businesses with employees to purchase workers’ compensation coverage. Those who fail to provide workers’ compensation coverage can face severe and costly repercussions including payment of claims out of pocket, fines, possible imprisonment, as well as potential to lose the right to conduct business in the state.
Understanding Employee Versus Contractor Designation
There are a few factors that go into determining workers’ compensation eligibility, but the big distinction is between employee vs. independent contractor. The law requires employers to provide workers’ comp for employees, but independent contractors are excluded.
This distinction between employee and independent contractor is actually a matter of federal tax law. Meaning, even if a company says they are hiring someone as an independent contractor, if the IRS says they are an employee, then they are an employee. You can learn more about how this classification of a worker is evaluated from the IRS website.
If you are unsure about your employment status or the status of your employees, you can ask a local attorney to evaluate your situation and determine what types of claims you may be able to file.