Workers’ compensation, or workers’ comp for short, is a program mandated by the state government. At its core, workers compensation provides benefits to workers who get involved in a work-related accident and become injured or ill on the job as a result.
With the exception of Texas, states around the country implement a mandatory workers’ comp program, although the required benefits differ from one state to another. It typically covers income for lost wages, healthcare benefits, medical costs, and disability pay. It also includes death benefits, such as funeral costs. So, in essence, workers’ comp helps employees by providing some benefits while they are out of work.
States also vary when it comes to which employees this program covers. For instance, some states don’t require small businesses to pay workers’ comp. Others don’t have this benefit for insurance agents, real estate agents, farmhands, casual workers, or self-employed and independent contractors.
However, the bottom line is that workers compensation insurance, where it is available, is essential for both workers and employers alike. Here are the many reasons why workers compensation insurance is important.
What is something that is required by a law or rule?
It Is Required by Law
In general, the law requires that employers take reasonable care to keep their workplaces safe. However, accidents can happen, and when they do, workers’ compensation insurance can come into play.
However, even if a state requires workers’ compensation insurance, the details might vary. State laws and court decisions determine these details, which include:
- Which employees are entitled to the benefit,
- Amounts of benefits,
- What injuries and impairments are covered,
- How injuries and impairments are to be evaluated,
- How medical care is to be delivered,
- Whether compensation will be provided by the state alone or by state-run agencies, and private insurance companies,
- How claims are to be handled,
- How disputes are to be resolved, and
- How to control costs.
Businesses or employers who fail to comply with this legal requirement can be subject to hefty fines, penalties, or legal action.
Workers’ compensation benefits
It Assures Medical Care and Compensation for Injured Workers
Workers’ compensation insurance has a two-fold purpose, according to the Insurance Information Institute (III). One of which is to provide assurance to injured or ill workers that they will receive medical care and compensation for a portion of their lost income while they are unable to return to work. This assurance stands no matter who was at fault in the accident.
These benefits include lost wages, disability, and reimbursement of healthcare cost. Typically, workers’ comp will pay injured or ill workers around two-thirds of their gross pay. They might also receive rehabilitation or therapy before returning to work. If the work-related accident resulted in a partial or full disability, then the worker will receive compensation for longer periods.
These benefits are also usually not taxable at the state or federal level, excluding Supplementary Security Income or Social Security Disability income. Workers’ comp will also give employees sick pay while they are on medical leave.
It Provides Death Benefits to a Worker’s Dependents
In addition to giving medical care and compensation for injured employees, workers’ comp also provides survivor benefits. If an employee dies because of a work-related accident or as a result of injuries sustained after the accident, workers’ comp will provide the worker’s compensation payments to their dependents.
Workers’ comp also covers death benefits. Typically, worker deaths that result from illnesses they developed as a result of their working conditions will be eligible for these death benefits. For instance, if their work exposes them to dangerous chemicals and they develop some type of lung disease and then die as a result. Or, if their pre-existing medical conditions are exacerbated by a workplace accident.
Funeral or memorial expenses are also covered by workers’ compensation insurance.
It Boosts Employee Morale and Productivity
Having workers’ compensation in place is a sign that businesses are valuing their employees. In the event of any work-related accidents, any resulting injuries or illnesses will be promptly addressed by the insurance. As such, workers’ comp signals that, as employers, businesses are prioritizing the well-being of workers. As a result, workers feel appreciated and secure in their jobs.
In addition, because of this fast response time, workers’ will be able to get back to work quicker. This helps maintain productivity levels and minimize downtime.
It Protects Employers from Lawsuit
Another purpose that workers’ compensation insurance serves, according to the Insurance Information Institute (III), is to protect employers from possible lawsuits. As workers’ comp is mandatory in many states, failing to provide this insurance can result in penalties and hefty fines as well as lawsuits.
Workers’ compensation insurance works on a no-fault basis, i.e., workers will receive the benefits no matter who is at fault. Because of this, employers forgo the hassle of going to court to settle the matter of how much they should pay for the accident-related injury or sickness.
It Provides Financial Security to Employers
When an employee gets injured or sick due to a work-related accident, they incur many expenses. There’s hospital bills and compensation for lost wages, for example. And, these costs can vary from one case to another. This isn’t good for any business as it can throw off their budgets and plans.
So, from an employer’s point of view, having workers’ compensation insurance is one way to keep work-related accident costs at bay. While they have to pay premiums each month for the insurance, when the unwanted happens, they can simply file a claim and don’t have to shell any amount out of pocket, if they don’t want to or can’t afford to do so. In other words, workers’ comp helps businesses maintain financial stability.
How Is Workers’ Compensation Insurance Important?
It is an Investment on Your Peace of Mind
Whether you are an employer or an employee, having workers’ compensation insurance to back you up in times of unexpected accidents is helpful. For workers, it guarantees that you have something to fall back on when you are unable to work.
Meanwhile, for employers, workers’ comp ensures your finances, budgets, and plans are not plunged down into chaos. Because workers’ comp can be relied upon when work-related mishaps occur, it can alleviate stress and safeguard your business.