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The latest data shows that 2.7 million nonfatal job injuries and illnesses occurred in the U.S. in 2020. That’s a decrease of 5.7% from the previous year’s count. However, both figures only account for the reported cases within the private sector.
In any case, those numbers are enough to show how prevalent workplace hazards are. So, it’s no wonder that most states, including Florida, require worker’s compensation insurance. Indeed, Texas is the lone state that doesn’t mandate employers to carry worker’s comp.
What is worker’s compensation insurance, though, and how does it work? What is its purpose, and why is it so essential that it’s a legal requirement in most states?
This guide answers all those questions (and more), so read on to discover what you need to know about worker’s comp.
What Is Worker’s Compensation Insurance?
Worker’s compensation insurance covers workers who’ve sustained work injuries or developed illnesses. It provides covered employees with cash benefits, health benefits, or both. The primary condition is that the injury or illness directly resulted from their job.
What Purposes Does Worker’s Comp Serve?
Worker’s compensation insurance entitles injured workers to medical care and compensation. It guarantees such benefits as long as the workers meet the conditions of the policy. It also extends benefits to a worker’s dependents if the covered employee dies on the job.
Like general liability insurance, worker’s comp also protects businesses from lawsuits.
The chief difference is that general liability covers premises-related lawsuits and claims. So, for example, if a customer gets injured while at your place of business, this insurance kicks in.
On the other hand, worker’s comp protects employers from cases filed by employees. If they don’t carry this coverage, workers who get injured or ill on the job can sue them.
In a nutshell, worker’s compensation is insurance that benefits both workers and employers. When employees agree to it, they give up their rights to sue their employer for negligence.
On the other hand, employers consent to some liability by buying coverage. In doing so, though, they can avert the much higher cost of a potential negligence lawsuit.
Who Pays for Worker’s Compensation?
Employers pay for worker’s compensation insurance. They shouldn’t require employees to make contributions toward the coverage.
Worker’s comp insurance companies, in turn, are the ones that pay the benefits. Once they approve the claim, they make a payment offer and discuss it with the employer and worker. That may include coverage for hospital bills, medicine, lost wages, and disability payments.
Do You Need Worker’s Compensation Insurance?
Apart from Texas, other states require most businesses to purchase worker’s comp insurance. That may include sole proprietors and partnerships with employees who aren’t owners. However, even employers not required to carry it can still choose to buy coverage.
Many states also exempt employers with only a small number of employees. That number threshold for mandatory worker’s comp insurance varies from state to state.
For instance, let’s say you’re a private employer with at least four workers in the Sunshine State. If so, it’s wise to start looking for the best Florida worker’s comp solutions provider. After all, your business meets the state’s criteria for mandatory purchase.
Does Worker’s Comp Require Proving Fault?
No, because the Worker’s Compensation Act follows a no-fault system. Employees are eligible for full benefits if they get injured or ill while working. Even if they believe an employer was negligent, they don’t have to prove such to get compensated.
However, some exceptions to the rule still apply, such as if it involves intoxication.
Let’s use fall, slip, and trip accidents as an example, as these are some of the most common work injuries. They’re so prevalent that they resulted in 211,640 injury/illness cases that led to days away from work in 2020.
Now, let’s say that an employee sustains on-the-job injuries due to a slip, trip, or fall accident. However, the worker’s medical report showed heavy drug or alcohol intoxication. As a result, the attending doctor determined that was the sole reason for the accident.
In that case, the worker may lose their rights to their worker’s comp benefits. That also applies to injuries that workers intentionally inflict upon themselves.
What Makes up Worker’s Comp Coverage?
Worker’s comp insurance is a two-part policy: Part A, also called Part One, and Part B, also known as Part Two. Part A and Part B provide similar benefits but under different conditions.
Part A satisfies the state-mandated worker’s comp insurance requirements. In contrast, Part B covers workers if their employers are liable. Thus, many refer to Part B as “employer’s liability coverage.”
What Does Part A Cover?
Worker’s compensation Part A covers medical expenses and missed wages. It also provides coverage for costs related to disabling injuries. Most policies also help pay for ongoing care and funeral expenditures.
Worker’s compensation provides medical coverage benefits to injured or ill employees. It can include emergency room visits, prescription medications, and necessary surgeries.
For instance, if a roofing technician gets injured on a job, the policy can help pay for their hospital visit. Likewise, the coverage can also help pay for medicines prescribed by a doctor.
Salary replacement helps replace some of an employee’s lost wages. Those losses, in turn, may arise from the need to take days off from work due to an injury or illness.
Suppose that one of your construction workers sustains a severe cut while working. As a result, the worker has to stay at home to recover for a few days. In that case, the worker’s comp policy pays out a portion of the wages they lose due to their job injury.
One in four U.S. adults, equating to about 61 million people, have a disability. Many are working-age adults, and some developed their condition due to their work.
Fortunately, worker’s comp also exists to help out workers who become disabled in the line of work. It provides coverage for both temporary and permanent disabilities. For example, it helps disabled workers pay for medical bills and replace some of their lost wages.
Suppose one of your machine operators gets into a work accident and has to use a wheelchair for a few months. Because of that, the worker can’t go to work while needing therapy and medicines to recover.
In that case, worker’s comp can help pay for part of the necessary treatment. The policy can also supplement some of the missed wages with disability benefits.
Severe work-related injuries and illnesses can sometimes require ongoing medical and hospital care. A perfect example is a chronic pain condition that affects over 50 million U.S. adults. Many of them have long-term pain due to work-related injuries, such as overexertion.
The good news is that such conditions are manageable with adequate ongoing treatments. Physical therapy, chiropractic care, and medications can all help. Best of all, worker’s compensation can help pay for some of the costs of those treatments.
It’s an unfortunate truth that as many as 13 U.S. workers, on average, die on the job each day.
If one of your employees dies due to a work accident, worker’s comp can still help. It assists the employee’s dependents with funeral expenditures. It also provides death benefits to the deceased worker’s beneficiaries.
What About Part B?
As mentioned above, worker’s compensation Part A and Part B provide similar benefits. However, Part B often only kicks in if the employer gets sued by the worker, their family, or a third party. In addition, unlike Part One, which has no limits, Part Two does.
Here are typical worker’s comp Part B coverage limits:
- Bodily injury by accident, $100,000 limit per accident
- Bodily injury by disease, $500,000 limit per policy
- Bodily injury by disease, $100,000 limit per employee
While not as often used as Part One, Part Two can come in handy if the damages owed go above and beyond the limits of Part A.
Are All Injuries and Illnesses Covered?
Worker’s comp covers injuries and illnesses classified as “AOE/COE.” That means “arising out of employment and occurring during one’s course of employment.”
In short, an employee’s injury or illness must have something to do with their job.
It can be easy to determine most job injuries because they usually occur on work premises. Examples are slips, trips, falls, contact with equipment, and machinery-related injuries.
What about worker’s compensation coverage for work-related illnesses?
Two examples are asbestosis and mesothelioma, which arise from asbestos exposure. Asbestos, in turn, was one of the most common construction materials used before the 1990s.
However, worker’s comp also covers injuries and illnesses that don’t happen on the job site.
For instance, let’s say a manager tasked an employee to drive a company car to meet with clients. Unfortunately, the worker got into a road accident and sustained injuries while driving. Since the employee was performing a job, worker’s comp should kick in.
How Do Employees File a Claim?
The first step to filing a worker’s compensation claim is to report an injury to an employer. So, as an employer, make sure that you let your workers know they should tell you as soon as they get ill or injured on the job. That’s usually mandatory and also comes with a deadline.
For example, injured or ill workers must notify their employer within 30 days in Florida. Failure to do so can result in the denial of the worker’s claim.
Once you, the employer, know of the incident, speak to your injured or ill workers. Inform them of their rights and benefits.
In most states, you also need to provide your employees with a worker’s comp claim form. They then need to fill that out completely and give it back to you.
Next, you, the employer, must report the injury and file the claim form on behalf of your injured or ill workers. You likely need to send all supporting documents to your insurer too. Make sure your workers’ doctors also submit their medical reports.
You may also have to notify your state’s workers’ compensation division. Some states refer to this department as the workers’ compensation board.
After filing the claim, the insurance company then assesses the case. The insurer either approves or denies the claim.
If approved, you and your workers should review the offer and ensure it is fair. If it is, the employees can then accept the offer and receive the benefits soon after.
If denied, workers can request the insurer for reconsideration. They can also seek help through the state’s worker’s comp board or division.
Is Worker’s Compensation Taxable?
Worker’s compensation benefits are generally not taxable. So, worker’s comp payments aren’t reportable on federal or state income tax returns.
However, worker’s comp may become taxable if employees receive other benefits. An example is a worker who receives Social Security Disability Insurance (SSDI). If the worker’s comp benefits offset a portion of those benefits, it might already be taxable.
What Factors Affect Worker’s Comp Premiums?
Insurers usually base premiums on the employer’s payroll and industry classification code. The more dangerous the jobs involved, the higher the costs often are. For example, companies involved in logging or hauling typically pay higher premiums.
Experience rating is another factor contributing to how high or low the premiums can get. For one, insurers know from experience where the highest number of accidents occur. They also know that incidents in such environments result in more significant losses.
Fortunately, worker’s compensation policies don’t have to cost you an arm and a leg. Work with a reputable worker’s comp solutions provider to find affordable options.
Start Shopping for Worker’s Compensation
And there you have it, all the answers to the question, “what is worker’s compensation insurance?”
You now know that it’s often a mandatory policy that benefits you, an employer, and your workers. It helps protect you, a business owner, from lawsuits. Moreover, it helps your employees get back to work ASAP.
So, don’t wait for a work-related accident to happen; start shopping for worker’s comp now.
Are you ready to purchase affordable worker’s compensation policies? If so, contact us for a free quote today!