Workers’ compensation insurance

Workers’ compensation insurance

A handbook for business owners on workers’ compensation insurance

Workers’ compensation insurance, or workers’ comp as it is more frequently known, is insurance that pays for medical costs and a percentage of missed wages for employees who are hurt or ill while working. Employee rehabilitation and death benefits are also included.

How does insurance for workers’ compensation operate?

Employers are required to abide by the specific set of workers’ compensation regulations that apply to each state. Regardless of employee culpability, these requirements aim to ensure that employers offer coverage for the costs of work-related injuries or occupational diseases.

Benefits can only be paid to an employee whose illness or injury is related to their employment or job obligations. Workers’ compensation insurance may provide coverage for accidents involving heavy lifting, slipping on greasy or damp surfaces, and being hurt in fires or explosions.

When an employee gets hurt while not working, such as when playing football with friends on a day off, their injury is not covered by workers’ compensation insurance.

Who requires insurance for workers’ compensation?

In almost all states, having workers’ compensation insurance is required by law. There are several worker exemptions, so you should check with your state to see if insurance is required for your company.

Refusing workers’ compensation insurance exposes your company to significant financial risk. In addition to the possibility of being sued for injuries sustained at work, breaching the law will probably result in a fine.

Remember that your small business is also protected by workers’ compensation insurance in addition to your employees. An employee who receives benefits, for instance, is not permitted to sue you for their injuries or lost income if your insurance complies with state law.

However, they have the right to sue you for items that are not protected by the workers’ compensation element of your insurance. Your policy also includes employer’s liability insurance to cover court costs and attorney fees in the event that you become a party to such a case.

Contractor sanding paint on a house while covered by workers’ compensation

What is the cost of workers’ compensation insurance?

Workers’ compensation insurance through UPI had a monthly median cost of $65 in 2021. $111 was the average monthly cost.

A lower median cost implies that outliers artificially raised the average premium above what the majority of policyholders actually paid. Your cost will vary depending on your business’s unique characteristics, such as its state, payroll, and claims history.

Frequently asked questions regarding workers' compensation insurance