Work Comp Insurance

Every state has mandated specific laws that require companies to provide worker’s compensations insurance, also called worker’s comp insurance or workman’s comp insurance.  This insurance provides coverage that ensures that the employee’s finances are protected if the employee becomes ill, dies, or is injured on the job.  The primary functions of worker’s comp insurance is to cover the medical costs when an employee is injured on the job, and at least some part of the employee’s lost wages during any time off that was unavoidable due to illness or injury.  There are additional benefits to having worker’s comp insurance.  However the tradeoff for employees is that for guaranteed limited coverage they forfeit the right to sue the company for negligence.

For the employer, worker’s comp insurance protects against total financial liability and potential legal action.  Depending on the size of the business, the number of employees, and other factors, a business owner will pay a premium for this insurance in exchange for not having to pay major liability costs.   The amount of the employer’s premiums to maintain this insurance depends on the size of the business, the number of employees, and the number of injuries previously recorded compared to claim ratios of other businesses in the same field and in the same region.
When does a company need worker’s compensation insurance?

Many factors affect worker’s comp insurance.  Each state also has its own standards of percentages that the insurer must pay, applicable safety regulations, and minimum number of employees needed to make worker’s comp insurance mandatory. Some states allow a company to have several employees without requiring insurance, whereas in California coverage is required for even one employee.
Employer options for insurance coverage…

Worker’s comp insurance is one option for employee coverage.  Another is called occupational disability insurance.  This form of coverage has a wider range of coverage ability.  It can be applied to employees as well as the employer, whereas worker’s compensation insurance is only applicable to employees.  A major benefit to occupational disability insurance is that it covers injuries and illnesses both within the workplace and outside the workplace.  However, because the benefits are greater, so is the cost.  It is up to the employer to decide whether occupational disability insurance or worker’s compensation insurance is more applicable.  To keep costs down and lower the risk of fraud, most employers choose worker’s comp.