If you own a business that has employees, chances are you’re required by your state to carry workers’ comp insurance. It’s a crucial type of small business insurance that helps protect your workers from the financial fallout that often follows a work-related injury or illness. In this guide, we’ll go over what workers’ compensation covers and address some common questions employers ask.
What workers’ comp covers
When an employee gets seriously injured on the job, their financial situation immediately changes. Hospital bills and prescription medication can be wildly expensive. Being unable to work for a period of time can compound money problems even further.
The primary goal behind workers’ comp is to provide employees with relief from the financial impact caused by a work-related injury or illness. Workers’ compensation insurance typically covers:
- Medical expenses
- Lost wages
- Funeral expenses and death benefits
- Ongoing care
- Permanent disability
Let’s go over each in more detail.
Medical expenses covered under a workers’ compensation insurance policy can include ambulance rides, emergency room visits, surgeries and prescription medications.
For example, if a heavy object falls from a scaffold, lands on and breaks your employee’s foot, they will likely need to take an ambulance to the hospital. During their visit, they may receive an x-ray or other diagnostic tests, and then the doctor may prescribe pain medication. Workers’ comp would cover all the medical costs associated with this ordeal, from the ambulance ride to the prescription medication.
For more serious injuries, medical treatment isn’t the only thing that impacts an employee financially. If they’re immobilized or otherwise impaired for a period of time, they’ll be unable to work and, in turn, collect a salary. Workers’ comp provides relief in situations like this by covering an injured employee’s missed wages.
To continue with the broken foot example, if the injured employee receives guidance from his doctor to remain in a cast for 8 weeks, workers’ comp can cover some (but most likely not all) of their missed wages
If the unthinkable happens and an employee passes away because of a work-related injury or illness, workers’ compensation insurance can step in by providing funeral expenses and financial support for the deceased’s family.
Lawsuits related to work injuries
Many workers’ compensation insurance policies include employer’s liability insurance. If an injured employee believes their injury was due in part to your negligence, they may decide to file a lawsuit against you. In such an event, your employer’s liability policy would help cover your defense fees, court costs, settlements and judgements.
Some workplace injuries may lead to an employee requiring multiple doctor or therapist visits. An employee who suffers a debilitating back injury may need to attend weekly physical therapy sessions. An office worker who develops carpal tunnel syndrome may need to visit an occupational therapist. Both cases are examples of ongoing care, something that is also covered by workers’ comp.
Permanent disability benefits (in certain cases)
In extreme cases, a workplace injury suffered by an employee can lead to long-lasting or even life-long effects. If over the course of treatment doctors determine that an injured employee will not fully recover, workers’ comp may provide permanent disability benefits.
In most states, permanent disability benefits are only awarded when an employee’s injuries are so severe that they’ll never be able to work again. Blindness or amputation are disabling injuries where an employee might receive permanent disability benefits. In other cases, employees may receive permanent partial disability, which would award them lost wages for a duration of time determined by your state’s workers compensation board.
Workers’ comp FAQs
As an employer, understanding your state’s workers’ compensation laws will go a long way in making sure you have the coverage required by law in order to properly file claims after a workplace incident. Here are some common questions about workers’ comp insurance:
Am I required to carry workers’ comp insurance?
Workers’ compensation is required by law for at least some employers in every single state except for Texas. Most states require business owners to obtain workers’ comp once they reach a certain number of employees. In Alabama, for example, businesses with five or more employees must carry workers’ comp. In Alaska, businesses must carry workers’ comp if they have any employees at all.
Are all employees covered by workers’ compensation?
The number of employees you have isn’t the only factor that determines whether or not you’re required to carry workers’ comp. Some businesses in select states aren’t required to purchase coverage for different categories of employees, such as farm workers, real estate brokers and domestic servants.
Every state has different requirements and exemptions. Check your state’s workers’ compensation board website to learn how your state’s laws affect your business.
What does workers’ comp not cover?
Not every workplace injury is covered by workers’ comp. In cases where claims are denied, the employee may have contributed to their own injuries. Depending upon the circumstances, the injured employees’ actions may disqualify them from receiving benefits. For example, if an employee is injured because they got into a fight in the workplace or was intoxicated, their injuries might not be covered by workers’ comp. Scenarios in which employees are not allowed to claim workers’ comp benefits vary state by state.
What should I do if an employee is injured?
Include instructions in your employee handbook requiring that all workplace injuries must be reported promptly to a supervisor. The report should include the date, the time the injury happened, and the circumstances and details surrounding the event. This information will be critical when it comes time to file a workers’ compensation claim. For job-related illnesses, employees should report the illness as soon as they obtain a diagnosis from a physician.
How do I file a workers’ comp claim?
If one of your employees gets hurt or sick on the job, your first priority should be to make sure they get all the medical attention they need. After you make sure your employee is safe and on the road to recovery, file a claim as quickly as possible.
To file a workers’ compensation claim, you’ll first need to gather all the information your insurance carrier requires. That could include your company’s account or policy number with the carrier; employee information such as name, age, date of birth and social security number; and details surrounding the accident including time and date of the injury, nature of the injury, and (if known) what caused the incident.
Gather every possible detail about the incident and contact your insurance company to file the claim. Note that every state handles workers’ comp claims differently, so taking time to understand how the process works in your state can help you avoid mistakes such as key details or filing deadlines.
The bottom line
Even when businesses follow safety protocols to the letter, workplace injuries still happen. Workers’ compensation insurance exists to protect workers (and in turn, businesses) from the financial ramifications of work-related injuries and illnesses. And while the laws and requirements surrounding workers’ comp can vary state by state, having coverage is always a smart idea—for your employees’ health and for the future of your business.