The Basics of Workers Comp Insurance
Workers Compensation Insurance can seem complicated and overwhelming at first. However, a professional from Workers Compensation Shop can simplify the process for you as much as possible. This article should provide you with the basics for workers compensation insurance.
The first question many business owners ask is whether they are required to have workers compensation insurance. In most states, employers are required to obtain workers comp insurance if they have any employees. In a few states, there can be exemptions if there are only a small number of employees. State laws must be checked with respect to whether there is an exemption from having to obtain workers comp insurance for a small number of employees.
Owners and officers of a company often have an option to reject workers comp coverage. It is more complicated to evaluate whether workers comp insurance is needed if 1099s are involved. Uninsured sub-contractors are often treated as employees of a business if they are injured on a job. Currently, Texas and Oklahoma are the only states where businesses can opt out of workers comp if they comply with other requirements.
As most businesses are required to have workers comp insurance, it is important to understand what it is. Generally, workers comp insurance provides a no fault remedy to employees injured on the job. Workers comp insurance allows businesses to meet their statutory and legal requirements while providing the predictability of an exclusive remedy for on the job injuries.
Workers compensation benefits may include payment or reimbursement of medical expenses, weekly payments in place of wages, compensation for past or future economic loss and benefits payable to dependents of employees killed on the job. Workers comp insurance policies generally do not cover damages for pain and suffering or for punitive damages assessed as a result of employer negligence.
Since most business are required to have workers comp insurance, the next question is where can one get it. The two primary avenues to obtain workers comp insurance are through private insurance companies and through state funds. Most of the time, a professional at Workers Compensation Shop can assist you with the most appropriate of the two options for your business.
The last basic question on most business owners’ minds is how much will workers compensation insurance cost. In general, cost is determined by how a business’ employees are classified and the payroll for a year. Credits, debits, experience modification factors and/or dividends may impact the cost of a policy.
An estimate of annual premium can be obtained by multiplying the annual payroll/100 by the base risk classification rate by the experience modification factor (which will generally exist if an insured has had 3 prior continuous years of coverage and pays more than a certain premium threshold per year).
In March, I wrote about how claims management could be used to control long-term workers comp costs (http://blog.workerscompensationshop.com/insurance/workers-comp-claims-management-practices-help-control-costs/).
