This is the first in a four part series where we cover everything an insurance broker needs to know about Workers’ Compensation.
The vast majority of companies need to purchase workers’ compensation coverage, and with your expertise, they can have great confidence in navigating the process from beginning to end.
Business owners need to have working knowledge of what worker’s compensation does, why they need it, and what their responsibilities are. There is a lot for business owners to comprehend about workers’ compensation, and they need their brokers and agents to guide them along the way.
Our brokers’ guide to workers’ compensation will give you plenty of talking points when you meet with clients to sell them a policy, review their coverage, engage in an audit, and file a claim.
What Clients Need to Know About Workers’ Compensation
Workers’ compensation is considered a form of social insurance because of the social relationship between the employer and its workers. As a commercial insurance policy, workers’ compensation pays for certain expenses for eligible workers who become injured due to a work-related incident.
Workers’ compensation pays for:
- Lost wages
- Medical costs
- Rehabilitation costs
- Death benefits
While workers’ compensation policies protect workers, they also protect businesses if an employee files a civil suit against the company.
Most, but not all companies are legally required to carry workers’ compensation policies, and each state sets its own laws and regulations for workers’ compensation policies.
Each state determines who sells workers’ compensation policies including which companies must purchase policies and what the penalties are for not having it. Employers may purchase workers’ compensation policies even if their state does not require them to buy them.
For example, in certain states, employers may only purchase workers’ compensation policies from an insurance company that is run by the state or from the state itself. In other states, employers must purchase workers’ compensation insurance from a private insurer.
For example, North Dakota, Washington, Wyoming, and Ohio are called monopolistic states as employers must purchase workers’ compensation coverage from a fund operated by the state. The same is true for Puerto Rico and the U.S. Virgin Islands.
States can impose penalties on employers who fail to purchase workers’ compensation insurance including loss of the business license, fines, or even jail time. The fines are steep in some states. For example, Illinois employers that do not provide workers’ compensation insurance may face fines of up to $500 per day. Officers and directors in Illinois may be held personally liable and may be fined up to $10,000.
About 30 states have something called “Second Injury Funds” which is a program designed to encourage employers to re-hire previously injured workers. The concept of “Second Injury Funds” is to help employers cover losses if a disabled worker gets injured at work for the second time.
Business owners should also be aware that their customers may ask for a workers’ compensation certificate to prevent a situation where they must file a claim against their own insurance if one of their employees gets injured at their residence, facility, or on their grounds.