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Why doesn’t workers’ comp cover all workplace injuries?

Workers’ compensation, also called “workers’ comp” or “workman’s comp,” was first established in the U.S. in 1908 with the passing of the Federal Employers Liability Act. This legislation granted railroad workers financial compensation should they be injured on the job. The first state Workers’ Compensation Act was passed in Wisconsin in 1911.

Today, several states offer workers’ compensation benefits provided by private insurance companies. There is a lot of uncertainty as to how workers’ compensation works and what exactly is covered under this insurance, so we are here to clear up any lingering confusion.

How workers’ compensation coverage works

Any small business that hires employees should have a workers’ compensation policy. In fact, in most states—besides New Jersey and Texas—it’s required by law. Workers’ comp is there to protect employees if they are injured or suffer from an occupational disease as a direct result of work. It pays out to cover employee medical expenses, as well as ongoing disability benefits in some cases. As far as who fronts the bill for workers’ comp insurance, it is the employer—the final cost is dependent on the size of the business and state laws.

Now, it is crucial to start the claims process immediately upon injury. If an employee waits too long to submit a claim or an employer takes too long to file a claim, the employee may be denied their benefits. As an employer, you should emphasize the importance of prompt filing. Here are the steps for reporting employee injuries to your workers’ comp insurance company:

  1. Instruct your employee to seek medical care immediately if they have not already.
  2. Give the injured employee the necessary paperwork for submitting a comp claim. This paperwork will typically ask for the date, time, place, and other details surrounding the injury.
  3. File completed paperwork—as well as supporting documents such as witness statements—with the insurance carrier.
  4. As an employer, you may also be required to file a report of injury form with the state workers’ compensation board.

What workers’ compensation insurance may cover

Depending on the plan, workers’ compensation insurance covers injured workers and their medical bills, lost wages, legal fees, and death benefits in the case of a fatal incident at work. There are separate workers’ comp programs that cover eligible employees. These include the Longshore and Harbor Workers’ Compensation Program and Energy Employees Occupational Illness Compensation Program. Here is a rundown of what is covered with each:

  • Longshore and Harbor Workers’ Compensation Program: The Longshore Program ensures that workers’ comp is provided to those covered under the LHWCA and suffer from work-related injuries. The LHWCA covers shipbuilders, ship-repairers, or harbor construction workers.
  • Energy Employees Occupational Illness Compensation Program: The EEOICPA provides benefits to employees and contractors of the Department of Energy who have fallen ill due to exposure to radiation and toxic chemicals.

There are some cases where workers’ comp will cover medical treatment for mental health conditions. Some states, such as Connecticut and Colorado, will cover psychiatric conditions obtained from work-related events. These conditions include PTSD, severe anxiety, and depression. Be sure to check with your state’s Division of Workers’ Compensation to determine what conditions are covered and which ones are not.

What workers’ compensation insurance doesn’t cover

There are certain injuries that workers’ compensation does not cover. These include:

  • Injury as a result of intoxication
  • Injury as a result of illegal activity
  • Injury as a result of horseplay
  • Injury as a result of company policy violation

Even though an employee is technically on company time, workers’ comp benefits are not eligible if someone were to go out to lunch during a shift. There are some instances when workers’ comp may cover injury outside of the workplace, however: for example, if an employee suffers an injury during a work-related task outside of work, or if an employee were driving to meet with a client or customer and got in a car accident that resulted in injury.

Pros and cons of workers' comp for employers

Aside from the fact that workers’ comp insurance protects your injured employees, it also reduces your risk of being sued by employees and facing significant financial loss. It is just as much there to protect you as it is to protect your employees.

One con of workers’ comp to business owners is fraud—it can and does happen. Say an employee exaggerates an injury they received on the job. There are a lot of costly fees if you decide to dispute the claim. Not to mention the amount of time a dispute takes to settle in court. Most of the time, workers’ compensation claims are legitimate. However, there are times when they are not, and it is important to protect your business in this case.

How insurance companies calculate workers’ compensation costs

It’s faster than ever to calculate workers’ compensation insurance costs with our workers’ comp calculator. Your premiums may vary depending on the insurance carrier, but you can ultimately find policies at affordable rates with Huckleberry.

Before you calculate your rate, it’s important to consider the following factors:

  1. Size of payroll and number of employees: The more employees you pay, the more you will pay for workers’ compensation. Think of it this way: more employees equals an increased likelihood of injury. The average cost for workers’ comp in California is about $3 per $100 of payroll. This will fluctuate depending on certain factors.
  2. Employee job: The nature of your employees’ work will also determine the cost of workers’ comp. If you own a construction business, you will pay a higher percentage of the payroll than if you owned a marketing agency. When applying for a workers’ comp insurance policy, you will be asked to detail the kind of work your employees do, and this will determine your “risk to insure.”
  3. Business location: Depending on where your business is located, you may pay more in workers’ comp. If you are starting a business in New York City, you will probably pay a higher premium than in Tuscaloosa, Alabama. Why? Well, because you are statistically more likely to be sued in a larger city than a smaller one.
  4. Safety record: If you have a solid safety record, insurance companies are more likely to favor you over a different business with a poor safety record. Thus, you will pay a smaller price for the insurance policy. If you run a large enterprise or corporation, your safety record will be quantified into an Experience Modification Rate (EMR). This number represents how safe you are compared to similar companies. A good EMR is below 1, but the average sits at about 1.
  5. Other factors: Your rate is subject to some tweaking before you see the final amount. An insurance company will make adjustments based on unique risks your business presents, your strategy for workplace safety training, and your overall attitude towards safety. Each of these adjustments can raise or lower your rate. On top of this, you will see some additional charges. There is the Expense Constant, which is how the insurance company gets paid for administering the policy. There are some workers’ compensation laws that require added surcharges, as well.

Get affordable workers’ comp insurance coverage with Huckleberry

It is highly recommended that you purchase workers’ compensation insurance the moment you hire your first employee. It is required by law in many states, including but not limited to California, Florida, Nevada, and Massachusetts. Be sure to check with the Department of Labor to see if it is required by law in your state.

With Huckleberry, getting workers’ compensation has never been easier! Fun fact: 95% of our customers complete the process in 5 minutes. Additionally, you can manage your policy 24/7 from our online business insurance portal.

Get a free business insurance estimate on your lunch break. Seriously, it’s that fast.

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