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Worker's
Compensation is the only policy which provides coverage for
employees injured on the job. Every company with an employee should carry
this coverage. Even if you do not carry worker's comp coverage, you are
financially responsible for the injury. Under the work comp law, an
employer is absolutely responsible for employee injury. It is a trade off
made to protect both employers and employees. The employee cannot sue the
employer in a normal court of law, but the employer accepts full responsibility
for injury to workers. In theory, this creates a system both parties can
live with. However, the liberal practices of the worker's compensation
boards in most states has made it a source of frustration for many
employers. The system has become slanted in favor of the employee.
The only true defenses to a work comp claim for an employer are intoxication
(drug or alcohol) and failure to follow documented safety procedures. Even
these often only result in a reduction of benefits. It is
still better than being sued every time an employee gets hurt on the job.
The payoff to the employee may be easier under the worker's comp system, but it
would be higher in a regular court.
Most states
require an employer with more than five employees to carry a worker's
compensation policy. Some states require all contractors, regardless of
size, to carry a policy. Smaller employers not required to carry a policy
should seriously consider it as well. Why
would an employer voluntarily incur this added cost? The
answer is simple - your employees can still be injured on the job and face
medical bills and the personal financial difficulty caused by lost income. The
industry-standard General Liability policy specifically does not cover employee injuries. Similarly, most
group health insurance plans look to a workers’ compensation carrier to pay
for medical bills from on-the-job injuries and would also not address the lost
income or permanent disability issues. So, you know who is left to pay!
What it Covers
The standard work
comp policy has two parts. Section A of the coverage provides for
statutory worker's compensation benefits per state requirements. There
really are no exclusions to this coverage. If the state work comp
board says it's a work related injury, the policy pays.
This includes coverage in three areas for employees who suffer injury
from an on-the-job accidents.
-
Medical
- pays 100% of all medical treatment for injuries arising from the accident,
with no deductible;
-
Loss
of Income - if an employee cannot work for more than 3 days as a
result of the accident, workers’ compensation coverage will pay two-thirds
of their average weekly wage (subject to a State dictated maximum) during
the period of time they are unable to work, as determined by the treating
physician;
-
Permanent
Partial Disability - in the event the accident results in a permanently
disabling condition that persists after the employee has recovered to the
fullest extent possible (e.g., amputation of a finger or loss of mobility
after a broken bone heals, etc.), the law gives the employee a lump sum
settlement which varies in amount based on the severity of the disability.
Each state has a table which specifies the amount each body part is
worth. Injuries affecting multiple body parts are typically
settled at a negotiated percentage of the whole body value.
Section
B of the policy provides Employer's Liability coverage. This provides
protection against lawsuits which allege employment related injury, but
are not specifically addressed in the state compensation law. Such
issues include a lawsuit from a spouse claiming loss of consortium (their
partner's injury prevented them from having sex) or some other hardship
related to an employee injury. Claims based on the contraction of a
communicable disease at work may also be made under the Employer's
Liability section. Some states do cover these under Section A.
These claims are handled outside the worker's compensation legal system,
by a standard civil court. While they are rare and few succeed, many
attorneys seek a way to make such a claim since the potential recovery is
not limited by the state work comp laws.
Limits of
Insurance
Section A
coverage is offered without a set policy limit. The policy will pay
whatever amount the state work comp board determines the claim to
be. The insurance company must pay for all such claims occurring
during the policy period. Essentially, the coverage under this
section is unlimited. This is part of the reason worker's
compensation is so expensive. Even a small employer could run up
millions of dollars in claims.
Section B
coverage, Employers Liability, is written with three different limits
which may be selected by the policy holder. The Each Accident limit
acts as an aggregate amount payable for all claims made from a single
accident or occurrence. The Disease limit is provided with an Each
Employee and Policy limit. The basic limits are $500,000 Each
Accident / $100,000 Disease - Each Employee / $500,000 Disease - Policy
Limit (commonly expressed as 500/100/500). These are provided
automatically with any worker's compensation policy. However, these
limits are generally inadequate to provide ample protection for most
businesses. It is most common to select limits of $500,000
(500/500/500) or $1,000,000 (1,000/1,000/1,000) for each part. These
limits are often required to schedule a worker's compensation policy on an
umbrella as well.
Deductible
Most
worker's compensation policies do not include a deductible. Some
states, such as IL, offer a discount for voluntarily adding a deductible
of $500 to $1,000 per claim. This would be charged on all claims
paid under the policy. Some high hazard operations carry deductibles
as do businesses with frequent and expensive claims. It is also
possible, and sometimes advisable, to establish a voluntary deductible for
small medical only claims. You can read more about this concept in
the Resource Center.
Now you know
what it is..... Find out what it cost!
For a detailed premium quotation, click
here!
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