Workers’ compensation is insurance that pays for medical care and part of lost wages when an employee is hurt or becomes ill because of their job. It is set up by state law, so the rules, benefits and requirements depend on the state where your employees work.
What is workers’ compensation insurance?
A workers’ comp policy covers your employees for injuries and illnesses that happen on the job, whether it is a fall on a job site, a back injury from lifting, a vehicle accident while making a delivery or a repetitive-strain injury in an office. It is a no-fault system: the employee does not have to prove the business did anything wrong to receive benefits.
In return, workers’ comp is generally the employee’s exclusive remedy for a work injury. That means the policy protects the business from most lawsuits over the same injury.
What a workers’ comp policy pays for
- Medical care for the injury, from the emergency room to follow-up visits, prescriptions and physical therapy
- Lost wages while the employee recovers and cannot work (a portion of their pay, set by state law)
- Rehabilitation and return-to-work support
- Disability benefits for lasting injuries
- Death benefits for the family if a work injury is fatal
Most policies also include employer’s liability coverage (Part Two of the policy), which helps if the business is sued over a work injury in a situation workers’ comp does not cover.
Why does my business need workers’ comp?
Almost every state requires businesses to carry workers’ compensation once they have employees. In many states the requirement starts with the first employee; some states only require it once you reach a small number of employees, and construction businesses are often required to cover every worker. Texas is the exception: private employers there can choose not to carry it, but they give up important legal protections if they do.
Going without required coverage can lead to fines, stop-work orders and paying an injured employee’s medical bills and lost wages out of pocket, and in some states it is a criminal offense. Many clients, general contractors and landlords also ask for a certificate of insurance before you can start work.
Why workers’ comp is important
- It protects your employees. Injured workers get care and income quickly, without having to sue their employer.
- It protects your business. One serious injury can cost more than many years of premiums. The policy pays those costs and limits lawsuits.
- It keeps you compliant. You meet your state’s requirement and can show proof of coverage to clients and partners.
- It helps you win work. Contracts, bids and staffing clients often require current workers’ comp coverage.
How the premium is calculated
Workers’ comp premiums are based on your payroll, the classification codes that describe the work your employees do, the rate for each code in your state and your experience modification factor (X-Mod), which reflects your claims history. Wrong class codes or an outdated X-Mod are some of the most common reasons businesses overpay.
How Redvo helps
Our licensed brokers have placed workers’ compensation since 2004 for businesses in all 50 states, including high-risk industries, high experience mods, new ventures and businesses that were non-renewed. We compare “A” rated carriers, check your class codes and audits, and can set up pay-as-you-go billing. Request a free workers’ comp quote or call us to review your current policy.
Frequently asked questions
Who does workers’ comp cover?
Your employees: full-time, part-time and seasonal staff are generally covered from their first day. Independent contractors are usually not, but each state has its own test for who counts as a contractor, and workers treated as contractors can be added to your payroll at the premium audit.
Do business owners have to be covered?
It depends on the state and how the business is set up. Many states let sole proprietors and partners choose whether to cover themselves, and corporate officers or LLC members can often elect to be excluded. We can check the rules for your state.
Are injuries away from the workplace covered?
Generally yes, when the employee is doing their job, for example driving to a client, making a delivery or working at a customer’s site. The everyday commute to and from work is usually not covered.
What is a workers’ comp premium audit?
Your premium starts from an estimate of payroll. After the policy year the carrier checks your actual payroll and class codes: if payroll was higher you owe additional premium, and if it was lower you get a credit or refund. Payroll records kept by class code make the audit quicker.
Can I buy workers’ comp from a private insurer in every state?
In most states, yes. In North Dakota, Ohio, Washington and Wyoming, workers’ comp is provided by a state agency instead, so employers there buy it from the state. Some other states also run a state fund that competes with private carriers.
Can I get coverage after being declined or non-renewed?
Yes, in most cases. Our brokers work with carriers that write high-risk industries, high experience mods, new ventures and businesses that were non-renewed, and pay-as-you-go billing can lower the upfront cost.