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Workers Compensation Insurance: What You Need to Know

If your employee has experienced an injury or an accident while on the job, workers’ compensation is going to be the first thought that pops into your head. Do you have appropriate workers; compensation for each of your employees? Are some of them in dangerous situations that will look bad to an insurer? 

So what do you really know about workers’ compensation, and how it will apply to your specific situation? And, are you prepared for what might happen if one of your employees is injured?

Let’s start with the most complicated question of them all – how much will workers compensation cost you and your business?

The long and short of it? It depends. Here’s what the cost of workers’ compensation for your company depends on:

  • What state your business is in
  • What industry your business is in
  • How many employees you have
  • The type of work your business does
  • The risks that the business exposes its employees to
  • The coverage that workers’ compensation covers

So that’s a lot that goes into that potential cost for your company – and a lot for you to consider. But, it’s easy to figure out how much you’ll pay by checking out a state-by-state guide that can help you narrow down the costs even further, and by just knowing facts about your industry, especially if it’s a high-risk industry for your employees, such as the construction industry. 

And, some of the costs you might incur when facing a workers’ compensation claim, you actually do have some control over. For example, if you’re operating your business in unsafe conditions for employees, then you’ll face higher penalties if one of your workers gets injured on the job. And, you can face penalties if your business is caught operating in unsafe conditions for employees, and if the conditions don’t change, you can incur fees up to hundreds of dollars a day until the conditions change. 

Another factor that goes into determining the cost for your business? How many employees you have. If your business is proven to be noncompliant with workers’ compensation requirements and you have less than ten employees, your fine will be much smaller than a business with a hundred or more employees – that’s when you’ll see very steep fines that will set you back tens of thousands of dollars. 

Cost – and the cost of not following the laws around workers compensation – are all factors to keep in mind when you’re running your business. 

So what does workers’ compensation cover, if you have an injured employee?

Injuries or illnesses covered by workers’ compensation insurance can cover anything from slipping on a wet surface at work, to a back injury from lifting something heavy, to burns from an unexpected fire event. 

Here are other examples of what workers’ compensation covers. And, if you want to read more about coverage, this article has great information on what to expect.

  • An ambulance ride to the emergency room, if the employee needs it.
  • Therapy to help them recover, such as physical or occupational therapy. Even if this therapy is ongoing for a while after the injury, workers’ compensation should still cover the costs as long as the employee needs it.
  • Lost wages, which covers the amount of time that the employee remains out of work due to their injury (as determined by a medical professional). This also includes paying their temporary replacement as needed during their absence on the job. 
  • Surgery, if your employee needs it due to their injury.
  • Any ongoing medical expenses that may last for years to come, due to the injury. 
  • Funeral costs and death benefits. If your employee dies on the job or because of something that happened to them at work, workers’ compensation covers funeral expenses and death benefits to support the employee’s dependents, if any. 
  • Legal costs, if it comes down to a lawsuit between you and the injured employee.

If that all seems like a lot, don’t worry – workers’ compensation insurance costs cover the costs of these expenses. You won’t be paying out of your company’s pocket for these specific expenses – it’s all covered by the plan that you have for each employee. And, this isn’t an exhaustive list. Your state may require different types of coverage plans, which means your coverage plan may cover all, or some of the examples above, or maybe even more.

What does workers’ compensation not cover?

From the list above, it might seem like workers’ compensation can cover just about any expense incurred during an employees’ injury on the job. However, there are several instances that you might not have considered when planning your insurance coverage. 

Here’s what’s not covered by workers’ compensation:

  • If the employee is injured outside of work. For example, if they’re injured at home, and try to file a workers’ compensation claim, just because they work at the company. This would not be covered by any plan.
  • If the person who’s injured is a volunteer for your company. Unfortunately, volunteers aren’t covered under workers’ compensation.
  • Paying the wages for a replacement employee who takes the place of the employee who was injured. If your employee is going to be out from their injuries for an extended period of time, you’ll probably need to think about hiring a replacement employee. But, your company will have to cover their wages because workers’ compensation doesn’t cover their wages.
  • Funds meant to improve workplace safety. If your employee was injured on the job because of faulty equipment, an unsafe work environment, or another factor that’s the fault of the company, workers’ compensation does not cover the funds needed to fix it. So, if your equipment is faulty, you cannot use workers’ compensation to cover the costs of repairing it.

Want to take a deeper dive into a business cost analysis of the specific costs for workers’ compensation? Check out this article that breaks down small business insurance costs by policy, sample use cases and the averages of thousands of businesses across the nation.