The Basics of Worker's Compensation Insurance:

If you are running your own business and have other employees, you must purchase a worker's compensation insurance policy. This policy will protect you should an employee become injured while they are on your premises or performing their duties.

If you are not familiar with worker's compensation insurance, the basics will be explained below.

State Regulations

Each state in the United States requires that employers have a worker's compensation insurance policy. However, each state may have different regulations on the type of policy that you will need to hold. You will need to check with your state's insurance board to determine what you are required to purchase before selecting your new policy.

Why It Is Important

A worker's compensation policy is essentially a "no-fault" agreement between the employer and the employee. In other words, if an employee is injured and you, the employer, are covered by a worker's compensation policy, they will not need to sue you for damages and you will not have to claim responsibility for their injury.

Who Has to Be Covered?

Basically, if someone works for you, they must be covered. However, if you are the business owner, you can normally exclude yourself from the policy, which can lower your overall costs. If your business employs less than five employees, you may not be required to purchase a worker's compensation policy. However, it is usually in your best interests as a business owner to cover all of your bases.

What Exactly is Covered by a Worker's Compensation Policy?

Because state laws differ, your level of coverage will depend on your state requirements. However, there are generalities, such as coverage for medical services, lost wages, and rehabilitation. Typically, your employees can expect up to 2/3 of their normal earnings to be replaced under a worker's compensation policy.

In addition to covering your employees, most worker's compensation policies also provide employer's liability coverage. This type of coverage will be useful if the family member's of an employee attempt to sue you for damages that resulted from an injury incurred by your employee.

You can also purchase other benefits, known as add-ons, which can provide you with even more coverage, such as Defense-Related Expense Coverage. This type of coverage will provide you with reimbursement for the expenses you may incur defending a worker's compensation claim from an employee.

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