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Workers’ Compensation Insurance
Workers’ Compensation insurance is a type of business insurance that covers medical costs and lost wages for employees who are injured or become ill on the job. Nearly every company with employees is required by law to carry this coverage, making it a cornerstone of a sound risk management program. Workers’ Comp is critical for protecting both your employees and your business.
What Is Workers’ Comp Insurance?
Often called Workers’ Comp, this coverage protects employees who are injured or become ill as a direct result of their work. While both Workers’ Compensation and General Liability insurance are crucial for protecting your business, they serve different purposes.
For example, a Workers’ Compensation policy specifically addresses injuries or illnesses sustained by employees while on the job. This is different from General Liability insurance, which covers injuries and property damage to third parties (like customers or vendors). Furthermore, Workers’ Compensation insurance covers a wide range of incidents, including, but not limited to, falls, repetitive motion injuries, and illnesses from chemical exposure.
Consider an employee who slips and falls in your office, breaking their arm. Workers’ Compensation insurance would cover their medical bills and a portion of their lost wages, whereas General Liability would not, as the injury was to an employee, not a third party.
Workers’ Comp Coverage
Almost every company with employees is required by law to carry Workers’ Compensation insurance. Regulations vary by state, but most states mandate coverage as soon as a company hires its first employee. This coverage is essential for any business with a workforce, whether they are full-time, part-time, or seasonal.
Who Needs Workers’ Comp Insurance Coverage?
The types of operations that need this coverage to mitigate their risk are diverse:
Construction & Skilled Trades
Businesses with employees who perform physical labor or work with heavy machinery.
Restaurants & Hospitality
Companies with staff who are on their feet, handling food, or working in fast-paced environments.
Professional Offices
Firms with employees who work at desks, but are still at risk of common injuries like carpal tunnel or falls.
Healthcare
Providers with staff who handle patients, work with medical equipment, or are exposed to biological hazards.
Retail & E-commerce
Businesses with employees who manage inventory, stock shelves, or handle customer returns.
What Does Workers’ Comp Insurance Cover?
While you’ll need to consult your specific policy documents to confirm your coverage, here are a few scenarios that are typically covered:
Medical Expenses
Covers costs for hospital visits, doctor appointments, surgery, and physical therapy related to a work injury.
Lost Wages
Can help replace a portion of an employee’s salary if they are unable to work due to a covered injury or illness.
Rehabilitation Costs
Covers expenses for physical therapy or other treatments needed for the employee to recover and return to work.
Death Benefits
Provides financial support to the dependents of an employee who dies as a result of a work-related incident.
Employer Liability
This is an add-on to the policy that protects the employer from lawsuits related to workplace injuries.
Workers’ Compensation Insurance Policy
Workers’ Compensation insurance covers:
How Can I Manage My Workers’ Comp Policy and Risks?
Understanding how to manage your Workers’ Compensation policy is essential, as this coverage is often a significant line item in a company’s insurance budget.
The cost of your policy is directly tied to the risk of injury your employees face, which is why maintaining a safe workplace is the best way to control your premiums. This includes implementing a safety program, providing proper training, and ensuring all equipment is in good working order.
If a covered incident, like an employee injury, occurs, your Workers’ Compensation policy will step in to protect you from financial loss. The policy does this by covering the employee’s medical expenses and a portion of their lost wages, while also protecting your business from potential legal action..
What Does a Workers’ Comp Policy Not Cover?
Like all insurance policies, Workers’ Compensation has exclusions. For example, it doesn’t cover the following claims:
Remember, Workers’ Compensation insurance focuses purely on protecting your employees from on-the-job injuries and illnesses, and protecting your business from related claims and lawsuits.
Worker’s Compensation Insurance Cost
The cost of a Workers’ Compensation policy depends on several factors, including your industry, payroll, and claims history. Premiums are typically calculated based on a per-$100 basis of your company’s payroll.
Workers’ Comp Insurance Cost Factors
Premiums are a function of your total payroll, as well as the risk classification of your employees. Industries with higher risks of injury (like construction) will have higher rates than those with lower risks (like professional offices).
How carriers determine premiums depends entirely on the industry, for example:
- Construction Premiums may be rated based on the total payroll for various job classifications (e.g., roofers, electricians, etc.).
- Restaurants The total payroll for kitchen staff, servers, and other employees will be a major factor in determining premiums.
- Professional Offices The total payroll for office staff is used, but the rate is typically lower due to the low risk of on-the-job injuries.
Additionally, many major commercial insurers will customize a Workers’ Compensation policy, which impacts the premium. Some of the most prominent enhancements include:
- Waiver of Subrogation
- All States Endorsement
- Employer Liability enhancements
Workers’ Comp Insurance Claim Examples
An employee at a retail store slips on a wet floor in a back room, twisting their ankle and requiring a trip to the emergency room. The store’s Workers’ Compensation policy would cover the employee’s medical bills and a portion of their lost wages while they recover.
A graphic designer develops carpal tunnel syndrome after years of working at a computer. The company’s Workers’ Compensation policy would cover the costs of physical therapy and any necessary medical treatment.
A warehouse employee is exposed to a cleaning agent while on the job and suffers a severe allergic reaction. The company’s Workers’ Compensation policy would cover the cost of the employee’s hospital visit and any follow-up care.
An employee at a retail store slips on a wet floor in a back room, twisting their ankle and requiring a trip to the emergency room. The store’s Workers’ Compensation policy would cover the employee’s medical bills and a portion of their lost wages while they recover.
A graphic designer develops carpal tunnel syndrome after years of working at a computer. The company’s Workers’ Compensation policy would cover the costs of physical therapy and any necessary medical treatment.
A warehouse employee is exposed to a cleaning agent while on the job and suffers a severe allergic reaction. The company’s Workers’ Compensation policy would cover the cost of the employee’s hospital visit and any follow-up care.
Insurance Brokers For Workers’ Comp Insurance
Founder Shield is a data-driven insurance brokerage serving high-growth, innovative industries. We have a passion for creating and developing innovative risk management products across emerging industries and work hand in hand with clients and underwriters to ensure transparency, efficiency, and reliability every step of the way. Our team has specialized expertise and experience in providing Workers’ Compensation insurance services.
We partner with the leading professional liability insurance carriers to craft tailored risk management programs for public companies and venture-backed companies preparing for funding rounds. With Workers’ Compensation insurance a major budget item, we understand that companies look for new and creative solutions to help manage increasing costs while also securing best-in-class coverage.
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