Worker’s Compensation Insurance: What Is It And When Do I Need It?

15 Aug Worker’s Compensation Insurance: What Is It And When Do I Need It?

“Workers’ compensation (colloquially known as workers’ comp in North Americaand compo in Australia) is a form of insurance that provides wage replacement and medical benefits for employees who are injured in the course of employment, in exchange for mandatory relinquishment of the employee’s right to sue his or her employer for the tort of negligence.” -Wikipedia

So what does this mean?  Well it may vary state to state but many states in the U.S. require that all employers purchase and maintain a worker’s compensation insurance plan.  Once you start a business one of your first calls after your accountant and your attorney should be an insurance broker.  Your insurance agent can inform you of your states rules and regulations as well as help you evaluate your own businesses need for the insurance, exposure and the worker’s compensation insurance classes that apply to you. Worker’s compensation insurance costs different amounts for different worker classifications e.g. the premiums for office labor will be different from carpentry help and so on.

What if you don’t get worker’s compensation insurance?  Well the rules state to state vary but in general if an employee is hurt at work they may sue you for medical bills and lost wages.  In some states it can go even further than that.  Here is an example.  If you own a retail store and your employee hurts their back lifting a box.  They blow a disk and require surgery.  The tens of thousands of dollars in medical bills and the 3 plus months of lost wages for treatment and recovery may now be your problem.  If you have worker’s compensation insurance for that same scenario you would file a claim and the insurance would handle the medical bills and issue a check for a portion of the missed wages.

In another scenario what if you own a company and you get hurt on the job and can’t go back to work?  What would you do if you were a woodworker and lost a few fingers on your dominant hand?

Bottom line….Call your agent and make sure if you are supposed to have coverage you do.