It takes a lot to own and operate a business. Deciding on a workers’ comp plan for your employees is a big decision and expense. Be sure to understand your options before you purchase a worker’s comp insurance policy. That way, you can be sure you are getting everything you need for a fair price.
Who Needs Workers’ Comp?
Workers comp laws vary for every state, but every business with any number of employees should have some type of workers comp insurance. The most important part of workers comp is complying with your state laws.
Workers comp insurance isn’t the same as a business owner’s policy or a general liability policy. Workers comp is insurance that is solely set for covering your employees if they happen to be injured during the workday.
Two Types of Workers’ Comp Insurance
There are two types of workers’ comp insurance plans for each state’s employers and their employees.
The first type of plan is a monopolistic state insurance fund. This fund requires employers to buy workers’ compensation from a state insurance company. States that have monopolistic insurance requirements are:
- Washington
- Wyoming
- North Dakota
- Ohio
Monopolistic state programs have a certain amount of limitations for workers’ compensation insurance. If you’re a business owner within a monopolistic state, some restrictions may be:
- Shopping for the best quote: Some states won’t let a business shop for the best price.
- Coverage for out of state employees: If you have out of state employees, you may need additional insurance.
- Rights to purchase employer liability coverage: This is important coverage in case an employee sues the employer. Some states don’t offer this workers’ comp insurance policy.
The second type of workers’ comp insurance policy is a competitive state fund. This plan lets the business owner choose a workers’ compensation insurance from the state or a private carrier. The benefit of this plan is that employers can select the coverage that fits their needs better. States that have competitive insurance include:
- Arizona
- California
- Colorado
- Hawaii
- Idaho
- Kentucky
- Louisiana
- Maine
- Maryland
- Minnesota
- Missouri
- Montana
- New Mexico
- New York
- Oklahoma
- Oregon
- Pennsylvania
- Rhode Island
- South Carolina
- Texas
- Utah
What’s Included in a Workers’ Comp Program?
A work comp policy is a two-part policy. The first is for employee benefits. This is the part that covers an employee’s medical expenses and lost wages from being unable to work. This part would also cover death benefits to the employee’s family. There are no limits on these claims unless the employer can provide proof of fraud.
The second part is the employer’s liability. If it appears the injury occurred because of negligence on the employer’s part, the employee may choose to sue the employer for negligence. This part of the worker’s comp policy would cover the cost of damages on top of the employee benefits the employee may be rewarded.
Part of the worker’s comp claim does have limits that can be decided upon when choosing your worker’s comp program. Workers’ compensation insurance has limits on the employer’s liability because it’s still always the employer’s job to maintain a safe workplace.
Limits for the employer’s liability policy are commonly represented as three numbers:
- 100 / 500 / 100
- 500 / 500 / 500
- 1,000 / 1,000 / 1,000
The numbers above represent the maximum amount the policy would payout. The amounts are 100x the number in the policy. So if you were to get a “100 / 500 / 100” that would translate to payouts of $100,000 / $500,000 / $100,000. The numbers each represent a different situation.
The first is how much will be paid out per accident. The second is how much payout per disease is within the policy year. The third is the amount paid out for each employee. After these limits are reached, additional expenses would have to fall under another policy or come out of pocket.
Shopping for the Right Policy
There is a lot of information to take in when trying to find the right policy for your business. It’s essential to really do your research on the laws and individual plans. The important thing to do is consider the following information when deciding upon your policy:
- The amount of employees you have
- What kind of employees are in the company
- The type of work the employees do
- The size of your payroll
Some insurance companies won’t sell workers’ comp insurance directly to the employer. You may have to find insurance through a broker. The benefit of this is an insurance agent or broker will have plenty of insight and will easily be able to help you choose the right plan that meets your needs.
Protect Yourself, and Your Business
Workers comp insurance is crucial if you’re a business owner. Don’t wait until it’s too late; consider shopping for a worker’s comp insurance plan today.
