Workers Compensation Insurance
Protect your business from Employee
Injuries & Ilnesses
If an employee is injured on the job or becomes sick with a job related illness, workers compensation insurance can pay for their medical expenses and rehabilitation costs. Workers comp can also provide partial lost wages if the employee is forced to miss work due to the injury. Some policies also provide death benefits if an employee is killed while performing a job related duty. If an employee decides to sue for damages caused by an occupational injury, illness, or accident, workers comp can also cover your legal expenses.
More about workers compensation insurance
Each state has its own unique set of workers compensation laws that employers must follow. These regulations help ensure that employers provide coverage for the cost of work related injuries or occupational diseases, regardless of employee negligence.
An employee can only receive benefits if their injury or illness relates to their job duties or employment. Workers comp insurance could cover injuries caused by lifting heavy equipment, slipping on a wet or oily surface, or sustaining injury due to fires or explosions.
If an employee isn’t acting within the scope of their employment and becomes injured, such as playing football with friends on a day off, workers compensation insurance won’t cover them.
Workers compensation insurance is required by law in almost every state. Some worker exemptions exist, so you’ll want to check with your state to find out if coverage is mandatory for your business.
Choosing to forgo workers comp coverage puts your business at high financial risk. Not only can you face a lawsuit for workplace injuries, but you’ll likely be fined for breaking the law.
Keep in mind, workers comp insurance protects not only your employees, but your small business too. For example, if your insurance is compliant with state law, an employee who receives benefits can’t sue you for their injuries or lost wages.
They can, however, sue you for things that aren’t covered under the workers comp portion of your policy. Employer’s liability insurance is also included in your policy to pay for court costs and legal fees if you’re involved in such a lawsuit.
How your payroll affects your workers comp rate:
- Size of the employer’s payroll
- Employee job classifications
- Company’s claim history
The basis for workers compensation premium is your annual payroll. For each $100 dollars of your payroll, there is a specific rate for workers comp, which is determined by the classification codes of your employees.
How employer classification affects your insurance rate:
The classification codes identify which types of work present more risks to the employees performing these tasks. For example: the class code for painters in Indiana might have a rate of $7.60 for every $100 in payroll, while the rate for an office worker might be less than $1 per $100 of payroll. Painters likely have a greater exposure for injury than an office worker, thus resulting in a higher rate for that class code.
How your experience modification factor affects your premium:
Your experience modifier (also known as a MOD) is a numeric representation of your company’s claim history. Experience modifiers are based on how your business compares to others in your industry with similarly classified employees. An average MOD is set at 1.00. Employers with fewer accidents than average have a MOD of less than 1.00, and thus pay a lower rate than their counterparts in the industry.
Premiums for workers’ compensation insurance are calculated by the formula below:
Annual Payroll X Classification Rate X Experience Modifier = Premium