Definition of Workers’ Compensation Insurance in Business Insurance

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Workers’ Compensation Insurance

Unfortunately, injuries can happen at any workplace. These can result in everything from a few days of missed work to lengthy periods of recuperation and therapy. In the worst-case scenarios, a workplace accident might lead to an employee’s death.

These situations can cause financial complications for the injured and their families. They can accumulate thousands of dollars in medical bills and lost wages. Luckily, there’s a form of insurance that protects employees and reimburses them for lost funds.

Workers’ Compensation

Unfortunately, injuries can happen at any workplace. These can result in everything from a few days of missed work to lengthy periods of recuperation and therapy. In the worst-case scenarios, a workplace accident might lead to an employee’s death.

These situations can cause financial complications for the injured and their families. They can accumulate thousands of dollars in medical bills and lost wages. Luckily, there’s a form of insurance that protects employees and reimburses them for lost funds.

Workers’ Comp Trigger

Workers’ comp is triggered immediately after an employee suffers a work-related injury or illness. For instance, a worker is covered if they get injured at the organization’s warehouse or a remote construction site.

The injury has to occur due to a situation that isn’t considered criminal negligence. For example, if an employer doesn’t realize one of their production machines leaked fluid, workers’ comp would kick in if an employee slips on the puddle. On the other hand, if the company knew and purposely maintained a poor working environment, it would be subject to criminal charges.

What Is Covered

Workers’ compensation insurance covers an employee's rehabilitation, medical care, and lost wages. Should an employee die from their injuries, the insurance covers any costs related to burial fees.

This compensation is handled under a no-fault clause. In other words, the employee is not considered at fault for the injuries they incurred. The exception to this is if the worker was under the influence of drugs or alcohol. In another example, they wouldn’t be protected if the injury took place due to theft or vandalism of the company.

On the other side of the policy, the company that purchases workers’ compensation insurance is covered from the risk of additional lawsuits from the injured party. Normally, this type of policy prevents the claimant from filing a tort (civil) suit for additional costs. They agree not to do so in exchange for the compensation built into the policy.

Workers’ Compensation State Fund

There’s an exception to this protection when it comes to workers’ compensation state funds. Run by a private company under the auspices of a state government, this form of workers’ compensation provides the same rights and privileges to employees. However, it doesn’t protect employers from being sued in the courts for additional reimbursement.

There are two types of compensation state funds. A monopolistic fund only permits workers’ comp to be purchased through the state. Commercial insurers aren’t allowed to compete. This form of fund is found in North Dakota, Ohio, Wyoming, and Washington.

On the other hand, a competitive fund operates within the state government but competes with workers’ comp programs offered by commercial insurers. Thus, their premiums and coverage options are even with or slightly better than other programs.

In either situation, a company would need to purchase additional coverage if they are part of a workers’ compensation state fund. This stop gap coverage provides the necessary protection to handle additional suits by employees for reimbursement.