Workers Compensation Insurance

Embroker helps you get workers compensation insurance. This state-mandated insurance policy covers claims from employee injuries, including medical expenses, death benefits, lost wages, rehabilitation, and more.

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What Is Workers Compensation Insurance?

Imagine one of your employees accidentally takes a tumble down the stairs at work and breaks a leg. Or another employee accidentally throws out their back lifting heavy office equipment.

Such incidents are an unfortunate everyday possibility and can represent a costly and unpleasant factor in your business. Workers compensation insurance (also known as “workers comp”) protects your business from the costs that result from incidents of injury in the course of employment.

Workers compensation insurance covers claims from injured employees, including medical expenses, death benefits, lost wages, and rehabilitation.

The coverage is a win-win for both the business and the employees. In most instances, employees give up the right to sue their employer over a workplace injury, knowing they will be compensated for any workplace-related injuries thanks to the workers compensation insurance coverage that their employers have purchased.

Who Is Workers Comp Insurance For?

In short, workers compensation insurance is the foundation for a quality insurance program for any company with employees.

If you own or run a small business or big corporation that interacts with people on a regular basis, or employs more than one person, you should secure adequate workers compensation insurance.

In terms of risk by industry, this study on workplace safety cited the top five injury and illness-prone industries like local government, healthcare retail, manufacturing, or hospitality.

The top five fatal injury and illness-prone industries are construction, transportation and warehousing, retail, and manufacturing.

Why Do You Need Workers Compensation Insurance?

Generally speaking, businesses need workers comp insurance because even the best safety precautions sometimes fall short and injuries and illnesses occurring at the workplace or resulting from work are all but inevitable.

No one likes to imagine one of their employees being injured on the job but it’s a reality that can’t be ignored. Accidents can happen anywhere—even after the most comprehensive safety training and in the most low-risk environments.

Should an employee be injured on the job, your legal expenses would be completely covered by your insurance. Plus, your employees would be completely covered for their medical expenses, wages for lost work, and any rehabilitation services. In the case of fatal accidents, funeral expenses are paid out to the remaining family members of the deceased.

What Does Workers Compensation Insurance Cover?

The policy will cover the near and long-term costs of an employee’s workplace-related injury or illness. It will pay for the hospital bill and for any medication or physical therapy that will be needed during recovery, even lost wages.

If an employee decides to sue, a portion of your workers compensation insurance should be able to cover your legal expenses in such a situation as well.

When compiling a list of the most common injuries that can occur at the workplace, most of them can be grouped into three categories: overexertion, contact with objects or equipment, and slips, trips, or falls.

This detailed survey conducted in 2018 gives insights into the top eight most common injury types occurring on the job last year:

  • Sprains, strains, and tears
  • Non-specified (usually soreness or swelling)
  • Contusions
  • Fractures
  • Lacerations
  • Concussions
  • Puncture wounds (excluding gunshots)
  • Heat burns

What’s Not Covered?

There is a “coming and going rule” that applies to injuries that will rule out coverage in cases of injuries that occur when commuting to or from work.

However, if your job entails driving and you suffer a work-related injury in your vehicle while driving during work hours, obviously, the workers compensation insurance policy will cover such an instance.

If your company likes organizing team building activities, try to make them as safe as possible, because most insurance policies will not cover injuries sustained at recreation events like team buildings and happy hours.

Similarly, any injury that is a result of intoxication or substance abuse will not be covered either.

What Does Workers Compensation Insurance Cost?

“Is it expensive?” might be the first question most business owners have about workers compensation insurance. The answer varies greatly from state to state (since each state has different workers compensation laws) and the insurance company from which you purchase your policy. 

Generally, there are five factors that will determine your workers compensation premiums:

  • How many employees you have
  • Your company’s claims history
  • Experience Modification Rates
  • The type of work they do
  • Workers Compensation Class Codes

The biggest single driver of workers compensation premium fluctuations is the Experience Modification Rates, also known as XMods. The XMod is a mathematical formula that insurance carriers use to compare similar businesses. An insurer compares a company’s estimated losses to actual ones over a three-year period, then assigns a number rating, with the hypothetical “average” being 1.00.

If a company has more losses than average, the score climbs above 1.00, thereby “taxing” the business for past claims. If a company outperforms its peers in safety, with fewer claims, the score drops below 1.00 and counts as a “credit.”

The Inspection Bureau, which promulgates experience modifications, does occasionally make mistakes. It’s advisable to review the worksheet yearly to confirm accuracy. This is yet another reason why working with an experienced and knowledgeable broker who’s committed to protecting your business from excessive costs is highly recommended.

For more information, read our full guide on workers comp cost and how to calculate premium cost per employee.

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