What Is Workers' Compensation Insurance and How Can It Help Your Small Business?

What Are Workers' Compensation Benefits?

Even when working in a safe environment, there may be some risk of an injury or illness. Workers’ compensation insurance can help cover an employee’s medical expenses and lost wages if a work-related injury or illness keeps them out of work. Workers' compensation insurance is a type of business insurance policy that helps cover costs associated with employee injuries and illnesses related to their employment.

Generally, workers' compensation insurance helps protect both businesses and employees from the financial effects of injury or illness suffered by an employee while on the job.

So, what does workers' compensation insurance typically cover?

Workers' compensation can help cover healthcare costs, replace lost wages, and compensate family members of employees who are killed on the job. The terms, conditions and exclusions of a given policy may vary, but wage replacement and healthcare cost reimbursement are generally standard benefits. It is important to note that the wage replacement benefit typically pays less than the employee's full salary. This discrepancy is, in part, due to the fact that workers' compensation payments are typically not taxable.

Importantly, for small business owners especially, employees who receive workers’ compensation typically cannot sue an employer for injury or illness suffered on the job if the injury or illness resulted from the employer’s negligence.

Is Workers' Compensation Insurance Required?

Workers' compensation requirements vary depending on the state in which a business operates. Almost all states require businesses to maintain workers' compensation insurance for its employees (although some exceptions apply). If a required business owner fails to provide mandated coverage, it could be subject to fines and possible imprisonment. The business may also have to pay for any claims out of pocket, which can be costly. Since this coverage is generally governed by state law, it is important to understand the workers’ compensation laws in the state where the business resides.

What Does Monopolistic State Mean for Workers’ Compensation?

A monopolistic state is one where the state government is the only seller in the workers' compensation insurance market. This means that private insurance companies cannot provide workers' compensation insurance to businesses in that state. Instead, businesses who are subject to workers’ compensation insurance requirements must purchase workers' compensation insurance from a state-run fund.

There are currently four states that have monopolistic workers' compensation systems: North Dakota, Ohio, Washington, and Wyoming. In these states, businesses purchase workers' compensation insurance through the state fund. One advantage of a monopolistic state workers' compensation system is that it may offer more consistent coverage and rates across the state. However, some critics argue that it can also lead to higher costs and less flexibility for businesses.

What Types of Workers' Compensation Data Is Typically Collected?

Because there is no central source of all workers' compensation data in the U.S., the types of data that each state collects may vary. However, there are two main data types to be aware of as an employer.

The first type of data is claim information. When an employee is injured or becomes ill on the job, they must file a claim to receive workers' compensation benefits. The claim should include details about the nature of the injury or illness, how it occurred, and the cost of associated medical care. Claim data can also include details about the employee, like age, gender, how long they have worked for the employer, the length of time the employee is off work for recovery, and the cost of partial wage replacement.

The other type of workers' compensation data is employer information. This data focuses on any existing hazards in the workplace and any measures in place to help prevent injuries and illnesses. The details of any employer-sponsored programs which may be designed to help workers return to the job without negatively impacting their recovery may also be collected as employer information data.

How Do I Obtain a Workers' Compensation Insurance Policy?

If you are wondering where you can find workers' compensation insurance for your company, the team at Acrisure can help.

Acrisure can help answer your questions about the different requirements and benefits of workers' compensation insurance coverage, and the costs of business insurance. Help protect workers and your company by offering a policy that provides adequate medical and wage benefits for your industry.

To learn more about workers’ compensation insurance or why your business may need insurance, contact us today or request a workers’ compensation quote online for your small business.