Statistics show that there were more than 2.8 million recorded cases of nonfatal workplace accidents in 2019. While one cannot wholly eliminate workplace hazards, business owners can protect both their employees and their business from these types of risks by investing in workers’ compensation insurance policies.
State governments mandate businesses with one or more employees to carry workers’ compensation insurance. These policies protect workers from on-the-job accidents and diseases. Large corporations often have a private insurer, but most businesses acquire their policies from third-party financial institutions. Insurance companies need workers compensation codes to estimate workers compensation rates for the appropriate risk associated with the work being performed.
Acquiring a workers’ compensation insurance policy involves multiple complex steps, which most first-timers may find confusing. Fortunately, we are here to help. We have listed some of the most crucial facts, tips, and guidelines about what business owners need to know about workers’ compensation insurance.
Winning the heart of employees is more difficult than winning their attention. Business owners must pay close attention to incentives that would benefit your employees and the company as well.
1. Employees Can Either Sue Employers or Collect Insurance Benefits
Before you list off workers’ compensation insurance as an unnecessary expense, bear in mind that these policies protect business owners as well. State-mandated workers’ compensation insurance limits a business’s liabilities when it comes to workplace injuries.
Yes, the company will have to pay just compensation for the treatment of work-related injuries and accidents. In exchange, however, employees who receive the full benefits can no longer sue their employers. Workers can only sue the company for negligent or intentional acts resulting in workplace injury if they waive their rights to workers’ compensation.
Generally, employees would accept the stipulation. Most would only waive their benefits if they held a grudge against their employer or felt that the compensation package does not cover their losses.
2. Coverage Includes Vocational Rehabilitation
Not all workers can return to their previous jobs after recovering from a workplace injury or disease. For example, blue-collar workers who lose function in their limbs can no longer perform manual labor, so they will have to find a new job.
Vocational rehabilitation benefits stipulate that companies should assist their ex-employees in securing new employers. The specific conditions vary per state. However, in most cases, the company has to assist with the following:
- Americans with Disabilities Act (ADA) accommodation fees
- Interview techniques training
- Job application and resume completion
- Job search and analysis
- Labor market surveys
- On-the-job training
- Post-injury recovery and management
- Retraining fees
- Transferable skills analysis and testing
- Vocational Rehabilitation Counseling fees
- Wage assessment
3. Workers’ Compensation Insurance Premiums
As with any other insurance policy, workers’ compensation premiums vary on a case-by-case basis. Multiple factors come into play when calculating the premiums, such as:
According to the 2020 Bureau of Labor Statistics released by the Department of Labor, the average premiums per employment type are as follows:
- Local Government Workers: 1.1% of total salary or $0.56 per hour on the job
- Private Industry Workers: 1.3% of total salary or $0.45 per hour on the job
- Civilian Workers: 1.2% of total salary or $0.46 per hour on the job
Workers’ compensation insurance premiums depend on your state’s laws, stipulations, and workforce population.
According to a 2020 report by the Oregon Department of Consumer and Business Services, the states with the priciest workers’ comp premiums include:
- New Jersey ($2.52)
- New York ($2.23)
- Vermont ($2.21)
- California ($2.16)
- Hawaii ($2.08)
Meanwhile, the states with the cheapest workers’ comp premiums include:
- Utah ($0.85)
- West Virginia ($0.79)
- Indiana ($0.77)
- Arkansas ($0.72)
- North Dakota ($0.67)
Industry and Business Type
Businesses that operate in dangerous work environments or high-risk industries would have to shell out more for workers’ compensation insurance premiums. Generally, your premiums increase as your insurability decreases.
A 2019 CNBC report indicates that the most dangerous, high-risk jobs today include the following:
- Fatal Injuries per 100,000 Workers: 98
- Total Nonfatal Injuries: 1,040
- Fatal Injuries per 100,000 Workers: 78
- Total Nonfatal Injuries: N/A
- Fatal Injuries per 100,000 Workers: 59
- Total Nonfatal Injuries: 490
Roofing Repair and Installation
- Fatal Injuries per 100,000 Workers: 52
- Total Nonfatal Injuries: 2,060
- Fatal Injuries per 100,000 Workers: 45
- Total Nonfatal Injuries: 1,490
Note: Financial institutions have varying criteria and factors they consider when determining the risk associated with insuring a business. We do not guarantee that premiums in industries with higher fatal injury ratings cost more than premiums in those with lower ratings. Instead, this list should simply give one an idea of the most high-risk industries today.
Financial institutions charge varying premiums. Large, commercial insurance companies that work with a wide range of low-risk clients will likely have excellent terms and competitive rates. Meanwhile, smaller brands that offer niche services, such as working with high-risk clients, might charge higher premiums.
We strongly discourage business owners from blindly signing up for the first, cheapest insurance offer they get. As mentioned, insurers have different selling points. The best approach is to identify which policies would address your business’s specific insurance needs.
Pro Tip: Business owners can choose from dozens of insurance providers on the market. Having multiple options can feel exciting. However, first-timers might find it intimidating or challenging to scour through all the insurance policies online.
To make the process easier, check out Assured Standard. They provide customized workers’ comprehensive insurance recommendations based on your business’s specific needs, preferences, and demands. You can also request a side-by-side comparison of the insurance premiums.
4. Workers’ Compensation Coverage Extends Outside of the Workplace
An employee can claim benefits for work-related injuries and diseases that occurred outside of the workplace. For example, if company A sends out employee A on a business trip, all accidents that might occur during the said trip classifies as a workplace injury. Generally, the coverage extends to all injuries that occur within the scope of employment.
The same stipulation applies to employees working remotely in this pandemic. As a business owner, you will still have to pay for treatment and recovery fees if one of your workers falls ill or suffers from an accident on the job, even if your company follows a work-from-home setup.
Although, we suggest consulting with a legal professional regarding what constitutes injuries and accidents under the scope of employment. Coverage might not include certain non-work-related cases that transpire outside of business hours.
5. Employers Cannot Treat Employees Who File for Workers’ Comp Insurance Benefits Unfairly
Some employees feel scared and intimidated to file for worker’s comp insurance benefits because they feel their supervisors would penalize them—especially blue-collar workers who hold no authority in their company. This fear, combined with one’s lack of knowledge, prevents injured employees from pushing through with their claims.
Fortunately, whistleblower laws protect claimants from abusive supervisors. The law prohibits employees and managers from retaliating or discriminating against workers’ comprehensive insurance claimants. Failure to comply can lead to legal consequences.
To clarify, business owners can conduct the necessary investigations. However, at no point in the process will employers demote, harass, or shame their employees filing for workers’ comprehensive insurance benefits, much less terminate their contract. Companies should carry out procedures professionally.
6. Workers’ Comp Insurance Does Not Cover All Injuries and Accidents
Business owners would do well to familiarize themselves on what injuries and accidents workers’ comprehensive insurance policies do not cover, which include:
- Self-inflicted injuries and damages
- Premeditated or planned “accidents”
- Insurance fraud attempts
- Cases in violation of company policies
- Incidents outside of the claimant’s job scope
- Injuries sustained from committing crimes
7. Employers Can Protect Themselves Against Insurance Fraud
Workers’ comprehensive insurance programs exist to protect employees from unfair conditions. Unfortunately, plenty of wrongdoers take advantage of these policies. In fact, reports from the National Insurance Crime Bureau indicate that workers’ comprehensive insurance fraud constitutes a large portion of the annual insurance fraud damages totaling $30 billion.
With that in mind, business owners would do well to conduct legal investigations and seek the help of legal professionals when dealing with workers’ comp insurance claims. Addressing the issue alone will only leave you prone to mistakes.
Some warning signs that indicate your employee might be filing a fraudulent claim include:
- Insurance Fraud History: Conduct investigations on claimants who have a delinquent history of committing insurance fraud.
- Lack of Witnesses: The claimant should at least have one reliable, uninvolved third-party witness to testify for them.
- Refusal to Get Treatment: There’s no reason for an injured claimant to refuse the necessary treatment procedures.
- Side Job Injuries: Ensure that your employee did not sustain their injuries while working for another employer.
- Quick Settlement: Claimants who are hell-bent on a quick settlement might have ulterior motives. Generally, injured employees would push for treatment or vocational rehabilitation assistance, not cold hard cash.
- Account Inconsistencies: It would help to have a keen, discerning eye toward fake stories and reports.
Overall, business owners should strive to create a safe, secure workplace for their employees. Identify ways to prevent the risk of accidents and diseases, troubleshoot significant workplace hazards, and provide your workers with the necessary benefits programs. Do not skimp on these protocols to save a few bucks.
Remember: your employees are your company’s greatest assets. A productive, happy, and secure staff can drastically improve business performance and help your company reach new heights. With that in mind, do not solely focus on generating profits. Instead, make an effort to empathize with your employees and address their plights as well.
Did this guide help you understand the concept behind workers’ compensation insurance policies and why your business needs them? Feel free to post your questions in the comments section below!