This article was updated on September 27, 2018.
Accidents happen. No matter how safe your business is, there's always the chance an employee can get injured or sick while on the job. In these situations, they may be eligible for workers' compensation benefits. Understanding workers' compensation coverage is important to ensure compliance with government regulations. Here's what you need to know.
Prepare Your Business
Workers' compensation insurance covers employees' medical expenses after a workplace injury or illness. It may also replace the employee's wages if he or she is unable to work while recovering or offer rehabilitation services if needed. In exchange for receiving these benefits, employees waive the right to sue the business owner for the incident. Workers' compensation applies to injuries or illnesses that occur as a result of the work performed or due to a workplace incident.
Nearly every state requires business owners to have coverage for their employees, but all states have varying regulations. California, for instance, requires insurance even if you only have one employee, while coverage in Florida is mandatory if you have at least four employees. In Alaska, some businesses are allowed to self-insure and avoid purchasing insurance if the state approves their situation. Texas, on the other hand, does not require workers' compensation insurance at all. Be sure to review the specifics with your state's labor department.
The process to sign up for workers' compensation also depends on the location of your business. Some states recommend you purchase through private insurance companies, while others require you to buy it through a state-run insurance fund.
You'll need to make insurance payments throughout the year. The cost depends on the danger-level of the work; for instance, it's more expensive to purchase insurance for construction workers than it is for receptionists.
The median cost of workers' compensation insurance in 2014 was $1.85 per $100 of employees' wages, according to the Insurance Journal. An employee earning $30,000 would cost around $555 annually to insure.
Without workers' compensation insurance in place, you may be at risk of fines and even jail time for not complying with the program. If an employee runs into a problem that would've been covered by workers' compensation insurance, you may be responsible for covering their expenses and may be sued by the employee.
Be sure to appropriately inform employees about their coverage. Post notices around the workplace to educate your employees about what the policy covers and processes for making claims.
If an employee becomes sick or injured as a result of the workplace, you must provide him or her with the claim form. It's your responsibility to submit the form to the insurance company. Check with your state's department of labor to determine if the employee must also file a separate claim or if any state-regulated time limits apply. If the claim is approved, the insurance company will pay out the employee's benefits.
Hopefully, your employees stay healthy and never have to use this coverage, however, understanding workers' compensation insurance can help protect your employees and business.
To learn more about protecting your employees and your business, check out the Workers' Compensation 101 Small Business Guidebook.
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