There are many different aspects to running a business, and business owners need to manage and keep up with all of the moving parts. Between the permits and licenses that must be obtained and all of the rules and regulations which must be followed, keeping track of all the responsibilities can quickly become overwhelming.
One of the most basic fundamental responsibilities of a business owner is to protect the safety and wellbeing of their employees. Carrying workers compensation insurance is not only a requirement, but it is also a moral imperative. As the old saying goes: “take care of the people who take care of you.”
In this article, we will take a closer look at what exactly workers compensation is, and we will explore several different types. Hopefully, this will help you to be more able to select the right workers’ compensation plan for your employees and your business.
Understanding Workers Comp
Workers compensation is an insurance policy designed to financially protect employees in the case of on the job injury or a job-related illness. Should a worker be temporarily unable to perform their duties due to a job-related injury or illness, workers compensation insurance will pay them a percentage of their average weekly income for the duration of their absence. This affords the employee the ability to maintain their cost of living while recuperating from their illness or injury. Workers compensation insurance will also cover any medical expenses incurred by the employee as a result.
Types of Workers Comp Programs
There are two primary types of state-funded workers compensation programs: monopolistic state fund and competitive state insurance fund. A monopolistic state insurance fund requires businesses to purchase workers compensation directly from a state insurance fund. As the name suggests, a monopolistic fund imposes certain limitations on business owners. These limitations may include the inability to shop around for the lowest price. Employers may also be required to source additional policies for out of state workers, and carry employer liability coverage in the event of a lawsuit.
Competitive workers’ comp allows the employer to select their coverage from private carriers. This means that the employer can choose the coverage that is best suited to their financial needs and situation. A competitive state insurance fund is typically more ideal, as it can be tailored to suit the needs of a specific business type or structure.
The requirements for workers compensation varies by state. Some will allow competitive state funds, while others limit employers to monopolistic funds.
Who Needs It?
Every employer in the United States is required, by law, to carry workers compensation insurance that provides coverage for all of its employees. This is non-negotiable. Failure by any business to maintain an adequate workers compensation policy can result in stiff fines and severe penalties. Furthermore, the company can be exposed to significant liability due to an employee-related injury or illness. Failing to maintain the required coverage also opens the employer up to the possibility of a forced shut down until adequate coverage is obtained.
Shopping Workers Comp Insurance
When shopping around for a workers compensation insurance plan, there are several key factors to keep in mind. Here are several tips to help you with making the right selection:
- Utilize an insurance agent or broker: Finding a skilled professional to assist you with selecting and purchasing the right workers’ compensation insurance for your business can make the process much faster and easier. Agents and brokers know all the laws and requirements, and can help you to find the most cost-effective solution.
- Understanding what is covered by workers compensation insurance: Knowing what your policy covers will make life much easier should the need arise to help an employee through the process of filing a claim.
- Review your policy regularly: Keeping up to date with your plan will help you to react appropriately to changing state requirements, or employee needs.
The bottom line is that your workers’ compensation insurance policy should financially protect your employees, as well as your business in the event of any job-related injury or illness. And it should be a cost-effective expense to maintain.
Protect Your Workers and Protect Yourself
As we discussed at the beginning of this article, it is both a legal and a moral obligation for employers to take care of their employees. Obtaining and maintaining workers compensation insurance protects your employees and your business from a financial disaster should the unexpected occur.