As the name says, workers' compensation insurance is a compensation scheme put in place (and paid for) by employers for the benefit of their employees. You must purchase this kind of insurance if you have people working for you.
How does workers' comp insurance work?
Every employer should understand the basics of workers' comp insurance in order to ensure they purchase the right amount of insurance for their employees. Otherwise, there could be huge financial and legal implications for their businesses.
Here's a primer to let you in on how workers' comp insurance works.
Workers' comp insurance is a mandatory employee benefit.
Regardless of the state or territory, workers' compensation insurance is a type of insurance you must have if you are an employer of a certain size. Each state has its own workers' compensation scheme. State governments ensure employer compliance with the workers' comp systems used in their respective states.
Benefits are available for employees injured at work.
All employers owe a duty of care to their employees. In addition to paying employees for the work that they do, employers must take reasonable steps to ensure their employees do not suffer an injury on the job. That said, workplace accidents can happen at any moment. When they happen, an injured employee deserves to be compensated for their injury regardless of who is at fault.
Workers' comp insurance is designed to provide financial damages for medical bills, hospitalization and other expenses that an employee may incur as they seek to recover from their injury. It also covers any income they may have lost because of their inability to go to work. In situations where an employee dies as a result of a work-related injury, the next of kin can be awarded additional damages for funeral costs and death benefits.
Employees relinquish their right to sue their employer.
By law, employers are generally required to accept liability for the accidents and injuries that occur under their watch and pay damages to injured employees. In return for receiving financial damages for their injuries, employees are expected to give up their right to file a civil lawsuit against their employer.
Businesses require commercial insurance of various kinds to cushion themselves against the financial losses they may incur due to the impact of risk events. While each industry has a unique set of concerns, there are some insurance types that every business must have regardless of the industry. One such type of insurance for businesses is workers' compensation insurance. Talk to a commercial insurance service provider about your situation to determine how much workers' comp insurance coverage your business needs.