FAQs about Workers Compensation Insurance
Do I need workers compensation insurance?
Nearly all businesses need to provide workers compensation insurance for their employees. Every state has its own workers compensation insurance requirements. Generally, only businesses in which all employees are partial owners of the business are exempt from providing workers compensation insurance. Even if you employ contractors, you may need to provide workers compensation insurance for them, so check your state's requirements. The amount of workers compensation insurance that you need will depend on the hazards your employees are exposed to as part of their jobs. In general, riskier work requires more workers compensation insurance coverage.
Is workers compensation insurance expensive?
The cost of workers compensation insurance depends on many factors. You will pay a small percentage of each employee's wages in insurance premiums. The percentage depends on how hazardous the employee's working conditions are. For example, the percentage for a retail employee would likely be under 1 percent of wages. However, employees working on construction jobs might require premium payments of up to 15 percent of wages. Often there are ways to increase safety in the workplace in order to decrease the cost of insurance premiums. Businesses in industries with a very low risk can sometimes cut their cost of workers compensation insurance by self-insuring.
How does workers compensation insurance work?
Workers compensation insurance works by paying workers for expenses resulting from a work-related illness or injury. These costs can include medical expenses, a percentage of lost wages, and even payments to an employee's dependents if the employee is killed on the job. Workers compensation insurance also protects employers from lawsuits filed against them by employees who become ill or injured due to their jobs. Employers pay rates equal to a percentage of their employees' wages in order to purchase workers compensation insurance from a private company or the state government. Each state has its own regulations for workers compensation insurance.
What is the difference between workers compensation insurance and employer's liability insurance?
Employer's liability insurance is an insurance policy that protects employers who are sued by employees who suffered a loss due to their employment. Employees who are injured on the job might sue their employer, and the employer's liability insurance would cover the cost of the lawsuit. Workers compensation insurance also protects employers from the cost of lawsuits from employees while protecting employees from costs they could incur due to an illness or injury that occurs on the job. Workers compensation insurance covers the cost of medical care and lost wages without employees needing to sue their employers for these expenses.
How do I determine how much workers compensation insurance I need?
The amount of workers compensation insurance you need depends on many factors. You will need workers compensation insurance to cover each of your employees, so the more employees you have, the more workers compensation insurance you will need. The amount of workers compensation you need per employee depends on each person's job duties. You will need to spend an amount equal to about 10-15 percent of an employee's wages for someone who performs physically risky work, and about 0.25-1 percent of an employee's wages for someone whose work involves minimal risk.
What is the minimum for workers compensation insurance?
The minimal amount of workers compensation insurance you need depends on the kind of work your employees do and the state in which your business is located. Each state has its own legal requirements for how much workers compensation insurance you must provide for your employees. This will usually include insurance that covers an employee's work-related medical expenses as well as a percentage of an employee's lost wages. The minimum amount of workers compensation insurance required will be higher for employees who perform work that puts them physically at risk of becoming injured or ill on the job.
Does workers compensation insurance have to be with the same company as my other insurance?
You do not have to purchase workers compensation insurance from the same company from which you purchase other kinds of insurance. You should obtain workers compensation insurance quotes from several companies in order to best understand your options. Sometimes there is also an option to purchase workers compensation insurance through your state government; in some states, publicly funded workers compensation insurance is mandatory. Depending on the risk level of your business, you may also have the option to self-insure, which in some cases is less costly than purchasing workers compensation insurance from an insurance company or the state government.
What questions will my agent ask me when I call?
When you speak with an agent about purchasing workers compensation insurance, the agent will ask you questions about your business. You should be prepared to discuss the number of employees you have, the wages you pay each of your employees, and the nature of the work your employees do. Your agent will need to assess the risk level of your employees, so you will need to provide information about their duties on the job, their work environments, and whether they work on or off site. Your agent needs this information to assess any potential hazards your employees may face.
What does the rating system mean and how can I find out how my insurance company is rated?
The insurance rating system is a means of grading the financial stability of an insurance company. Ratings are based on each company's quarterly financial reports. Good ratings range from A++ to B, so you should consider purchasing workers compensation insurance from a company whose ratings fall within this range. You can look up your insurance company's rating and compare the ratings of other companies online by searching for an insurance company's name on the A. M. Best website .
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