Worker’s comp insurance helps protect employers and support employees. If you’re a small business owner, you should understand workers’ compensation and how it works.
What is workers’ compensation?
Workers’ compensation insurance helps provide medical, rehabilitation, and disability benefits for employees who become injured as a direct result of their job. Workers’ comp may also pay death benefits to an employee’s dependents if the worker is killed in a work-related incident.
In addition to helping employees and their families, workers’ compensation insurance can also help cover business owners. Workers’ compensation helps protect businesses from liability for employees’ workplace injuries, and it helps keep employers from having to pay directly out of pocket for those injuries. This coverage may reduce the risk of a significant financial loss if an employee is harmed while performing work duties.
The American workers’ compensation program was established more than a century ago as a cooperative arrangement to reduce the conflicts that can arise between businesses and employees when accidents happen. Because both employers and employees benefit from workers’ compensation, it has historically been referred to as “the grand bargain.”
How does workers’ compensation work?
Here’s a simplified example of how the workers’ compensation process may work in the case of an undisputed claim for a workplace injury:
The employer researches state workers’ compensation requirements.
The employer gathers appropriate information and contacts the insurance provider for a workers’ compensation quote.
The employer obtains a workers’ compensation insurance policy from an insurance provider to cover employees.
The employer provides a safe workplace, posts workers’ compensation employee rights, and educates employees about the workers’ comp procedures.
If a worker is injured on the job, the worker notifies the employer immediately.
The employer obtains medical assistance for the worker in the case of an emergency or permits the employee to leave work for medical treatment for less severe injury.
The employer immediately sends the first report of injury form to the insurer.
The employer gives the employee the workers’ compensation claim form within the mandated time frame.
The employee returns the claim form within the mandated time frame.
The employer reports the injury to the insurer (and state, if required) within the time frame.
The insurer investigates the claim.
The insurer sends the employee notice that the claim has been delayed, denied, or accepted.
If it is accepted, the worker will receive benefits within the mandated time frame. If it is denied, the worker may appeal.
Workers’ compensation varies by state
The workers’ comp claims process varies from state to state. Each state administers its own workers’ comp program through a commission or board that ensures businesses comply with workers’ comp laws. Since workers’ comp is legally required in nearly every state and situation, having adequate coverage and following the policy requirements ensures employers won’t have to pay fines or imprisonment. Fortunately, workers’ comp can not only help protect a business from financial loss, but it can also support an injured employee’s quick return to work—helping both the employee and the business get back on track.
Thanks for reading! Please note that this content is intended for educational purposes only. As laws change regularly, you should refer to your state legislation and/or an advisor for specific legal counsel. If you’re a small business owner, learn more about workers’ compensation insurance or check your current rate in 3 minutes.