Workers Compensation insurance pays benefits to your employees if they are injured while on the job. Specifically, it covers their medical bills, a portion of lost wages, vocational rehabilitation and death benefits. Almost every state requires by law that employers carry some form of workers’ compensation insurance. Because the coverage amount is established by state law, benefits do not vary from company to company within the same state.
What does workers’ compensation cover?
Benefits paid to employees generally include:
- unlimited reimbursement of medical expenses
- a portion of lost wages
- some vocational rehabilitation
- a survivors death benefits Benefits paid to the employer generally include:
- Responses to lawsuits brought by injured employees or their dependents for grossly negligent acts by the employer
- Protection against employee claims for pain and suffering and loss of relationship (except in North Dakota, Nevada, Washington, West Virginia, Wyoming and Ohio)
Who does workers’ compensation cover?
- Workers’ compensation covers all the employees of the small business. Special provisions must be made if employees work out-of-state. It can cover the business owner if the business is a corporation, and the owner is actively involved in the business. It does not cover independent contractors.
- Officer/Partner Information according to CA Labor Code:
- Sole Proprietors are not included for coverage
- Officers of Private, For Profit Corporations may be excluded from coverage only if:
a. 100% of corporate stock is held by the corporate officers/directors and
b. excluded officer owns stock
5. Partners - Only general partners may be excluded from coverage. Limited partners may not be excluded.
6. Officers of Public Corporations may not be excluded.
7. Non-Profit Organizations/Corporations
8. Officers/Directors who receive compensation are considered employees. They are included for coverage and may not be excluded. Their payroll should be included and is not subject to a minimum or a maximum.
9. Officers/Directors who DO NOT receive compensation are considered volunteers and are not covered. No payroll should be included for these volunteers. Some companies will include Volunteers, ask your agent.
10. In most cases insurance companies exclude relatives who reside with the business owners. Examples are when business owners have their children working for them and the children also live at home. Contact your agent to find out if they are covered.
How does workers’ compensation work?
When a worker suffers an injury, even a minor one, it is immediately reported to the workers’ compensation insurance carrier. The employee seeks necessary medical attention, and the insurance company pays the bills. If the employee misses work because of the injury, the insurance company pays the employee limited benefits for the lost time. If the employee is not able to return to the job due to a permanent injury, the insurer pays to re-train the employee for another line of work. If the employee dies, the insurer pays a death benefit to the employee’s family.
Why do I need workers’ compensation?
Most states require by law that employers provide workers’ compensation benefits. Only businesses that pass strict financial tests by the state can consider "self-insuring." Even if approved, special measures usually must be taken to comply with the various state laws. Failure to carry it exposes the employer to paying what the insurer would have paid, plus severe fines, and possibly even jail time for violating the law. The benefits can amount to hundreds of thousands of dollars. The employer has a legal duty to make sure employees get the legally mandated benefits without delay.
What affects my rates?
- Size of payroll
Workers’ compensation premiums are based directly on the amount of your payroll. The higher your payroll, the more in workers’ compensation premiums you will pay!
- Job classifications
The cost of workers’ compensation insurance also varies widely depending on the work function of an employee. In general, a premium for an employee who is a roofer is much higher than a premium for a clerical worker. Employers must accurately report payroll by classification of work performed. Your insurance company can advise you which classes apply to your employees.
