What is Workers Compensation Insurance?

Posted by Pekin Insurance on Aug 22, 2016

From construction projects to reception desks, accidents can happen on any work site. Fortunately, there's a safety net to compensate the injured without bankrupting the company. But what is workers compensation exactly?

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A slip on the office's icy front steps. An unmarked hot water pipe. A broken emergency switch on a wood working machine. There are dozens if not hundreds of scenarios that could lead to a workers compensation (often abbreviated "workers comp") claim. Thankfully, workplace injuries aren't exceedingly common, but when they do happen, it's important that both the employee and the employer understand what that means in terms of workers compensation.

What is workers compensation?

Workers compensation is a form of insurance mandated in most states that takes care of an employee's medical bills, lost wages, and in extreme cases, life insurance when that employee is injured, made ill, or killed on the job. Workers compensation can only be claimed, however, if the employee (or surviving dependent) releases the employer from all legal claims associated with the illness or injury. In this way, workers compensation becomes something of a settlement between an employee and employer in the case of an injury or illness caused by something on the job site.

The original purpose of workers compensation was to cut down on the number of lawsuits brought to litigation in the case of workplace injury. It essentially releases the employer from any wrongdoing (exceptions apply in some states) while ensuring that an employee doesn't bear the expense of an injury that wasn't his or her fault (though some states do have caps on how much workers compensation an employee may receive). Some states have government-funded programs, though most leave it to private insurers to write and administer workers compensation policies. The only state that does not mandate workers compensation insurance is Texas; it is required everywhere else, including on the federal level.

Medical expenses

The most common application of workers compensation has to do with an injured employee's medical expenses. In this way, workers compensation acts as a sort of health insurance. There are two benefits to this. The first is that workers compensation sometimes covers things that an individual policy may not. The second is that the relevant claims won't go against the employer's group health insurance policy, which means they won't be factored into the following year's premium increase.

Lost wages

Another use of workers compensation is to replace an employee's income if that employee misses work because of a job-related injury. In this way, workers compensation acts as disability insurance. The benefit to most employees is that workers compensation will likely replace all of the lost wages whereas most long-term disability policies only cover up to 60% of lost wages with a monthly cap. A workers compensation policy only has to cover lost wages if the employee has in fact missed work due to the injury. It cannot be used as a punitive measure against an employer for damages incurred, etc.

Life insurance

The final use of workers compensation insurance is to provide financial assistance to any next of kin of an employee who is killed on the job. This, thankfully, is the least used application, but because of that, it may also be one of the least known. If a loved one ever loses his or her life on the job due to employer negligence, surviving dependents should find out whether or not they might still file a workers compensation claim.

What workers compensation isn't

Workers compensation doesn't cover injuries caused by an employee's own negligence. If a freshly mopped floor is properly labeled and an employee slips on it anyway, that may not be a workers compensation claim. If a carpenter doesn't wear protective gear while using a wood working machine and sustains an injury as a result, that may not be workers compensation. Workers compensation is only for injuries or illnesses caused by an employer's failure to provide a safe working environment. Just because an accident happens on a work site doesn't mean it's a workers compensation claim.

Does workers compensation effect employment?

It's illegal for an employer to retaliate against an employee for a workers compensation claim, even if that claim goes to litigation and is lost. However, retaliation is a very difficult thing to prove in court, so employees should take care to properly document any instance of workplace injury.

Employers, too, should take such care, not because of retaliation, but because if an employer doesn't properly document a workplace injury, an employee may be able to take advantage of the workers compensation policy. For example, if an employee claims to suffer carpal tunnel from excessive use of a computer at work, but the employer doesn't save a copy of a doctor's note or make a record of the employee's complaint, that employee will almost certainly win a workers compensation case even if the carpal tunnel never existed.

Protection for everyone

Workers compensation is protection for both an employee and an employer. The reality is that most workplace injuries are accidents without malicious intent or egregious negligence. It therefore makes sense to have a policy in place that shields an employee from any financial hardship suffered as the result of a workplace injury while simultaneously protecting the employer from any unnecessary or excessive legal action. 

Creating a Return to Work program that encourages employees to come back to work early, at a limited capacity, has also shown to decrease healing time and improve relationships between affected employees and their employer.

Pekin Insurance can help protect your business from financial losses with valuable coverages like Workers Compensation, Business Liability, Commercial Auto, and much more. Add in our many business coverage enhancements, and you’ll see that we can easily take care of all your commercial insurance needs.

    

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