If you’re a business owner of any kind and plan to hire employees, you’ll almost certainly need to acquire workers’ compensation insurance. This can be a highly complicated form of insurance, leaving many entrepreneurs with a number of questions about how it works.
Who needs workers’ compensation insurance? What exactly does it cover? Why do the requirements vary from state to state? How expensive will workers’ comp coverage be for your business? This article will discuss everything you need to know about workers’ comp, from the basics to the details.
Workers’ compensation insurance provides coverage to employees who suffer injuries or illnesses as a result of their employment. The United States government has its own workers’ comp program that covers federal employees. For everyone else, state law dictates the rules and regulations that govern workers’ comp requirements for your business.
While the guidelines can vary considerably by state, in general, workers’ compensation is a “no fault” form of insurance. This means that it doesn’t matter whether the employer was at fault for the employee’s injury or illness for it to be covered.
In addition, workers’ comp covers employees during all work-related activities. It doesn’t matter if an incident takes place on-site at your company’s physical location or not.
When an employee gets injured on the job, the employer’s responsibility extends well beyond the initial treatment. There are a few different things that are covered by a workers’ compensation insurance policy, including the following:
There are some situations where workers’ compensation insurance does not apply. One of the most common situations is when an employee was intoxicated by alcohol or drugs at the time of the incident.
Self-inflicted injuries are also not covered, nor are those inflicted during a fight started by the employee or injuries or illnesses that occur outside the job.
Finally, if the injured employee suffered their ailment while violating company policy, workers’ compensation insurance will likely not cover it.
Every state has its own set of rules and regulations regarding workers’ compensation, and there can be a great deal of variance in how each state interprets these benefits. In fact, the state of Texas doesn’t even require employers to have workers’ comp insurance.
Depending on where your company is located, there can be major differences in the level of benefits available for employees, what’s covered, and how injuries and illnesses are assessed and treated. It’s important to acquaint yourself with your state’s particular regulations regarding workers’ comp. If you operate in multiple states or plan to expand to more states, you’ll need to be familiar with the unique requirements in each location.
Aside from these general items, there are four main areas where states diverge when it comes to workers’ comp insurance. These differences concern how states handle businesses that fail to comply with coverage requirements.
The cost for workers’ compensation insurance varies widely based on the state or states where you operate and the nature of your business.
When looking at workers’ compensation costs on a state-by-state basis, you can see that some states are far more expensive than others. For example, Alaska is the most expensive state, with premiums reaching $2.74 per $100 in payroll expenses. Texas, which does not require businesses to carry workers’ comp insurance, has the lowest premiums, with rates of just 75 cents per $100.
The industry you operate in also play a large role in determining the costs of your policy. For example, high-risk jobs in fields like natural resources and construction have similarly high workers’ compensation premiums, costing the average business owner in excess of $1 per employee hour.
On the other hand, in industries with little risk, like sales and other office work, the cost can be less than 25 cents per employee hour.
Fortunately, there are a few ways entrepreneurs can lower their company’s workers’ compensation premiums. While you can’t change the nature of your business, there are some options available to business owners looking to decrease their financial commitment to workers’ comp.
Other tips for trimming down your workers’ compensation commitments include making sure you avoid assigned risk insurance pools for companies with adverse track records. You may also consider raising your deductibles and taking full advantage of coordinated disability plans, if available.
Workers’ compensation insurance can be a surprisingly detailed and nuanced issue for many businesses. The lack of consistency from state to state can make it difficult to navigate the requirements, costs, and coverages, especially for businesses operating in multiple states.
Workers’ comp is a vital piece of the puzzle when it comes to the insurance needs of most businesses, and it’s sometimes every business owner should take the time to understand. If you take care in the way you set it up, it’s possible to acquire workers’ compensation insurance that provides the protection you need without breaking the bank.