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How does workers’ compensation work?


Workers' compensation covers the costs of employee injuries and illnesses, including lost wages and more. It's required by law in most states for businesses with employees.

If an employee is injured or sickened on the job, workers’ compensation insurance can pay for the worker’s medical expenses and rehabilitation costs. If the employee is forced to miss work due to the injury, workers’ comp can also provide partial lost wages. In addition, some policies provide death benefits if an employee is killed while performing a job-related duty.

Workers’ comp insurance also has benefits for employers. A policy can cover legal expenses if an employee decides to sue for damages caused by an occupational injury, illness, or accident.


Who is required to buy workers’ comp insurance?

Most business owners with employees are required to purchase coverage, although workers’ comp requirements vary depending on where the business and employees are based. To make sure your business has the appropriate coverage for your state’s requirements, talk to an Insureon agent who specializes in insurance for your industry and who can explain how workers’ comp functions in your state.

Sole proprietors and freelancers usually are not required to carry coverage, but they may still want to consider purchasing a policy. If they are injured while working, workers’ comp ensures they will at least have partial income while unable to work.


How workers’ compensation claims work


Employees who experience a workplace injury or occupational illness should immediately report the incident to the employer. Reporting periods are different for each state, and if an employee doesn’t make a report before the specified deadline, he or she might not receive benefits.

After an injury or illness is reported, business owners and employees should take the following steps:

Visit an approved healthcare professional

  • Injured or ill employees should seek medical assistance

  • Start the claims process

  • File the claim

  • Receive benefits

  • Return to work 

How workers’ compensation insurance benefits businesses


No workplace is ever completely safe or without risk, even if businesses have comprehensive safety policies in place. According to occupational injury data from the U.S. Bureau of Labor Statistics:

  • Businesses experienced 1.1 million occupational injuries and illnesses in 2017 that resulted in days away from work.

  • Employees missed work for a median of nine days due to their injuries.

Employers are ultimately responsible for any worker injuries, which is why most states require business owners to carry workers’ compensation coverage. Without proper coverage, business owners could be forced to pay out of pocket for an injured employee’s medical treatment, as well as potential fines, depending on the state. 

Take action to reduce workplace injuries


Providing a safe work environment can benefit business owners and their employees. Here are a few steps employers should take to minimize the chance of a workplace accident:

Conduct regular safety training. Reinforce best practices for safety and conduct, such as training employees how to properly use equipment.

Keep the door open. Business owners should let employees know they can always share questions or concerns about safety in the workplace. That way, if an employee brings up a potential safety issue, the business owner can take corrective measures before someone gets hurt.

Provide information about the plan. Employers should provide information about how workers’ comp works to all new hires and hold periodic refreshers on the process with existing employees. 

Paul has $500,000 of liability coverage as part of his auto insurance. He is in a car accident and is found to be at fault. His umbrella policy will not pay out until after the first $500,000 has been disbursed from his auto insurance policy. Assuming he has $2 million in umbrella coverage, and the other party involved in the crash settles for $1.5 million in damages, the $1 million in excess liability above his auto policy threshold would typically then be covered under his umbrella insurance

Consider example
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