Workers’ compensation insurance provides financial protection for employees who are injured, become ill, or die on the job. In doing so, it also protects businesses and negates the need for lengthy and often stressful financial battles.
What is workers’ compensation? Why was workers’ compensation insurance created? How does workers’ comp work? What are the typical workers’ compensation benefits? How do you get coverage? What does it cost? You’ll be able to find out everything you need to know about workers’ compensation insurance for small businesses here in our detailed guide.
Who Benefits From This Guide to Workers’ Compensation Insurance?
Understanding what workers’ compensation insurance is and how it works is crucial for three primary groups:
- Small business owners. This guide provides vital insights on workers’ comp, including how to get affordable coverage. It also explains that having coverage typically is necessary to comply with state regulations and avoid fines, penalties, and other potential pitfalls. Plus, it’s a helpful reminder to consider risk management initiatives that reduce the likelihood of workplace injuries.
- Human resources professionals. It’s crucial that you have an in-depth understanding of workers’ compensation insurance so you can assist employees who’ve been injured as they file a claim, advocate for workplace safety initiatives, develop educational resources for workers, and help management understand your workers’ comp policy.
- Frontline employees. This guide explains your rights following an on-the-job injury, what’s involved in filing a claim, and your role in ensuring that the workplace is as safe as possible.
What Types of Businesses are Required to Have Workers’ Compensation Insurance?
Employees are protected financially by workers’ compensation, meaning it protects those who are injured, get sick, or die as the result of a work-related incident. Workers’compensation benefits include coverage for medical costs, legal fees, and lost employee wages. It can also pay what’s called a death benefit to a worker’s family if an employee dies as a result of an on-the-job accident.
Workers’ compensation insurance requirements vary by state and it’s important to make sure you check out all the legal requirements of each place before you purchase workers’ comp insurance. However, nearly every business that has employees—full-time, part-time, or seasonal—is required to carry workers’ comp coverage. Failure to do so can often result in costly claims if an employee is injured on the job.
There are few exceptions to this rule. Consequently, if your business employs anyone, you should assume that you’re required to have a workers’ comp policy unless you receive information from the workers’ comp authority in your state explicitly stating that you don’t have to have a policy. (You can also learn more about insurance requirements for your state on our website.)
You should also be aware that some states require workers’ comp insurance for construction industry sole proprietors or those who pay subcontractors.
The Origins of Workers’ Compensation Insurance
What is workers’ compensation and how did it come into being? The U.S. workers’ compensation insurance system was created in the early 1900s and modeled after principles already in place in Europe.
Before this system’s development, employees injured at work had the right to sue employers for the cost of their medical care, lost wages, and other costs. However, to receive a workers’ comp settlement, they had to prove that the company’s negligence was the cause of their injury, and that was no easy task.
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