Workers' Comp: Commercial Insurance?

Workers' compensation insurance, often referred to as workers' comp, is a type of insurance that covers employees who become sick or injured at work. It is considered the oldest social insurance program in the United States and is required by law in almost every state. The insurance covers medical expenses, lost wages, rehabilitation costs, and even death benefits for the employee's dependents. It also protects employers from potential lawsuits related to workplace injuries. While workers' comp laws vary by state, it is generally required as soon as a business hires its first employee. The cost of workers' compensation insurance depends on several factors, including the number of employees, the location of the business, and the industry.

What does workers' comp insurance cover?

Workers' compensation insurance, commonly known as workers' comp, is a type of commercial insurance that provides financial support and benefits to employees who get injured, sick, or die due to a work-related incident or condition. It is designed to protect both employees and employers by covering various costs and reducing liabilities. Here is a detailed overview of what workers' comp insurance covers:

Medical Expenses

Workers' comp insurance covers the costs of medical treatment related to work-related injuries or illnesses. This includes emergency room visits, hospital stays, surgeries, medications, and other necessary treatments. It also covers ongoing care costs, such as physical therapy or occupational therapy, that an employee may require during their recovery.

Lost Wages

Workers' comp provides compensation for lost income by covering a portion of an employee's regular wages if they are unable to work due to their work-related injury or illness. This helps employees maintain financial stability while they take time off to heal or recover.

Disability Benefits

If a work-related injury or illness results in a partial or permanent disability, workers' comp insurance provides disability benefits to assist employees. These benefits help cover medical bills and replace some of the lost income due to their disability.

Death Benefits

In the unfortunate event of an employee's death due to a work-related incident, workers' comp insurance provides death benefits to support the employee's dependents. This includes funeral expenses and other forms of financial support for the family.

Illnesses and Occupational Diseases

Workers' comp insurance also covers certain illnesses and occupational diseases that employees may contract due to their work environment or conditions. For example, employees exposed to toxic chemicals or harmful substances at work can receive coverage for medical treatment and ongoing care related to their illness.

Repetitive Stress Injuries

Not all work-related injuries are the result of a single incident. Workers' comp insurance also covers repetitive stress injuries, such as carpal tunnel syndrome, which can develop over months or years. It helps employees receive treatment and ongoing care for these types of injuries.

Workplace Violence, Terrorist Attacks, and Natural Disasters

In addition to accidents and illnesses, workers' comp insurance covers injuries or traumas sustained due to workplace violence, terrorist attacks, or natural disasters while the employee is acting within the "course and scope" of their employment.

It is important to note that workers' comp insurance does not cover injuries or illnesses that occur outside of work, during commutes to and from work, or due to intoxication or substance abuse. Additionally, each state has its own specific laws and regulations regarding workers' compensation, so it is essential to refer to the relevant state's workers' compensation department for detailed information.

Is workers' comp insurance required by law?

Workers' compensation insurance, commonly known as workers' comp, is required by law in almost every state in the US. This insurance provides financial support for employees who get hurt or sick on the job, helping to pay for their medical bills, lost wages, rehabilitation, and more. It also protects employers from potential lawsuits related to workplace injuries.

While the specifics of workers' compensation laws vary from state to state, there are some general patterns. In most states, sole proprietors and partnerships are not required to purchase workers' compensation insurance unless and until they have employees who aren't owners. Even then, some states don't require employees who are paid solely on commission to be covered. Additionally, many states exempt employers with only a few employees from mandatory coverage laws, with the threshold number of employees that triggers mandatory insurance being either three, four, or five. Texas is the only state where workers' comp insurance is truly optional.

Businesses that fail to carry compulsory workers' compensation insurance can face severe fines, heavy lawsuits, or even criminal charges. For example, in California, failing to provide workers' compensation is a criminal offense punishable by up to a year in jail and a fine of at least $10,000. In Illinois, non-compliant employers must pay $500 for each day of noncompliance, with a minimum fine of $10,000. New York imposes fines ranging from $1,000 to $50,000, as well as an additional penalty of $2,000 for every 10 days without coverage. Meanwhile, in Pennsylvania, intentional noncompliance is a felony that can result in a $15,000 fine and up to seven years in prison.

To summarize, workers' compensation insurance is required by law in almost all states, and businesses that do not comply with these laws may face significant legal and financial consequences. The specific requirements and penalties vary by state, so it is important for employers to understand the laws in their particular state.

How much does workers' comp insurance cost?

Workers' compensation insurance, commonly known as workers' comp, is a type of insurance that provides financial support to employees who are injured or become ill on the job. It helps cover medical bills, lost wages, rehabilitation, and more. This type of insurance also protects employers from potential lawsuits related to workplace injuries. The cost of workers' compensation insurance varies depending on several factors, and there is no standard cost. Here is an overview of the factors that influence the cost and some estimates to give you an idea of how much you might expect to pay.

Factors Affecting the Cost of Workers' Compensation Insurance:

• Number of Employees and Payroll: The cost of workers' comp is typically calculated per $100 of payroll. Therefore, the more employees you have and the larger your payroll, the higher your premium will be.
• Type of Work: Jobs with higher levels of risk will result in higher workers' comp costs. For example, an accountant's work is generally considered lower risk than that of a lumberjack. Occupations with a greater potential for workplace injuries, illnesses, or death will likely require higher premiums.
• Claims History: If your business has a history of submitting a large number of workers' compensation claims, especially severe ones, you will likely be subject to higher rates.
• Business Location: The location of your business can also impact the cost of workers' comp insurance. Premiums tend to be higher in areas with a higher population and a higher risk of natural or man-made catastrophes.
• State Regulations: Workers' compensation laws vary by state, and some states have more generous benefits than others. As a result, premiums for workers' comp insurance may be higher in states with more comprehensive benefits.
• Number of Claims: The frequency of claims is a significant factor in determining premiums. A higher number of claims indicates less safe working conditions, which can lead to higher costs for the insurance company.

Average Cost of Workers' Compensation Insurance:

According to The Hartford Insurance, small businesses insured by them pay an average of $1,028 per year or $86 per month for workers' compensation coverage. However, the cost can vary depending on the specific factors mentioned above. NEXT Insurance, another provider, reports that their policyholders pay an average annual premium of $1,020 or $85 per month, with a median premium of $660 or $55 per month. Progressive Commercial, on the other hand, reported a national median cost of $67 per month in 2023, with an average monthly price of $119. In Maryland, the average cost is even lower, at $43 per month.

Ways to Save on Workers' Compensation Insurance:

• Training and Safety Standards: Implementing training programs and prioritizing workplace safety can help reduce the likelihood of injuries and lower your insurance costs.
• Choosing Deductibles and Limits: Opting for a higher deductible can lower your insurance rate. Additionally, choosing the right limits and deductibles can help optimize your coverage and costs.
• Bundling Policies: Combining workers' compensation insurance with other types of insurance, such as general liability insurance, can often result in cost savings.

Who needs workers' comp insurance?

Workers' compensation insurance, commonly known as workers' comp, is required by law in almost every state. It provides financial support for employees who get hurt or sick on the job, helping to pay for their medical bills, lost wages, rehabilitation, and more. This insurance also protects employers from potential lawsuits related to workplace injuries.

Most states require business owners with employees to have a workers' compensation certificate of insurance. However, there are some worker exemptions, and specific requirements vary from state to state. For example, in Arizona, businesses with at least one employee, whether part-time or full-time, are required to have workers' comp coverage. On the other hand, Texas is the only state where workers' comp insurance is entirely optional.

In most states, sole proprietors and partnerships are not required to purchase workers' compensation unless they have employees who aren't owners. However, even in states where coverage is optional, it is recommended that small businesses obtain coverage to protect themselves and their employees.

Additionally, contractors and volunteers may be entitled to workers' compensation benefits if they are injured or become ill on the job, depending on the state. To avoid unintended liability, larger companies often require any contractors or subcontractors to provide proof of their own workers' comp insurance.

Workers' comp insurance is not included in a Businessowners Policy (BOP) and must be purchased as a separate policy. It is important to understand the specific requirements of your state, as each state has its own workers' compensation laws and regulations.

How do I get workers' comp insurance?

Workers' compensation insurance, commonly known as workers' comp, is important coverage for businesses to have. It provides financial support for employees who get hurt or sick on the job, helping to pay for their medical bills, lost wages, and rehabilitation. This insurance also protects employers from potential lawsuits related to workplace injuries.

Understand the Requirements in Your State:

Each state has specific rules and regulations for workers' compensation insurance. Check your state's workers' compensation laws and requirements, as they vary across the country. Understand the mandatory coverage levels and where you can purchase workers' comp insurance.

Gather Information About Your Business:

Before obtaining a quote, you will need to gather detailed information about your business. This includes the number of employees, the types of employees (full-time, part-time, contractors, etc.), the nature of their work, your business location, payroll, and claims history.

Explore Coverage Options:

Depending on your state, you may have multiple options for purchasing workers' compensation insurance:

• Private Workers' Compensation Insurance Companies: States regulate these insurers, but they set their own prices and approve or reject customers. Private companies may offer more competitive rates and better customer service compared to state-funded options.
• State-Funded Workers' Compensation Insurance: If private coverage is unavailable or too costly, state-funded programs can ensure your employees are covered. Some states offer coverage from both private carriers and state programs, competing with private insurers for customers.
• Monopolistic State-Funded Workers' Comp: In certain states, such as North Dakota, Ohio, Washington, and Wyoming, businesses are required to obtain coverage through their state-funded program.

Contact an Insurance Agent or Broker:

Consider working with an insurance agent or broker who can guide you through the process. An agent typically represents insurance companies and sells their policies, while a broker represents the buyer and helps them find the best policy from different insurers.

Get a Workers' Comp Quote:

You can obtain a workers' compensation insurance quote directly from an insurance company, through an agent or broker, or by using online tools provided by insurance companies. Provide the necessary business information, and you will receive a recommended coverage level and a cost estimate.

By following these steps, you can obtain appropriate workers' compensation insurance for your business, ensuring that your employees are protected in the event of work-related injuries or illnesses.

Frequently asked questions