Workers' Compensation

What is Workers’ Compensation?

Workers’ Compensation is an insurance policy that helps to cover the expenses of an employee related to medical care and loss of pay caused by a work-related injury or illness. It is a legal requirement in most states for businesses with more than a few employees.

Who Purchases the Workers’ Compensation?

Workers’ compensation insurance is purchased by the employer or business owner and is underwritten by an insurance company or publicly supported state funds.

How is the Cost of Workers’ Compensation Determined?

The cost of workers’ compensation is determined based on:

• Job Classification: In each state, comparable businesses having a similar pattern of work-related injuries are grouped into classes. The cost of workers’ compensation for each class is based on loss costs in the prior five years for all businesses in that class and the economic factors of the state. 
• Employer Experience Rating: Modifications to the cost of the workers’ compensation are also be made based on the loss history of individual businesses.
• Employee Wages: The higher the employee’s wages, the higher the workers’ compensation premium will be.

How do Workers’ Compensation Claims Work?

The steps involved in making a worker’s compensation claim are as follows:

• If an employee is injured or becomes sick, they must see a doctor as soon as possible so that medical reports can be obtained to support the injury claims. 
• The employer should also be informed of the injury or illness in a timely fashion. 
• The employer must then provide the necessary paperwork and forms to be filled out by the employee. 
• The duly filled paperwork is returned to the employer and a claim is filed with the insurance company. 
• The workers’ compensation agency of the state may also need to be notified.
• Depending on the outcome, the employee may choose to appeal the decision.

What are the Benefits of Workers’ Compensation?

Workers’ compensation benefits employees by helping pay for:

• Medical Expenses: This includes doctor’s visits, prescription medication, hospital care, physical therapy and rehabilitation, and other treatments.
• Disability: Partial replacement of lost wages is also covered. The amount and duration of payment will depend on the severity of the disability and whether it is permanent or temporary.  
• Vocational Rehabilitation: This helps the employee learn a new skill if their limitations post-injury make it impossible to return to their previous occupation.
• Death Benefits: This is compensation given to the spouse and children in case of the death of the employee.

Workers’ compensation benefits employers by:

• Protecting the employer from civil lawsuits by injured or ill employees.
• Helping avoid out-of-pocket expenses to pay for the work-related injuries.