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What Is Workers' Compensation Insurance?

Workers' compensation insurance (workers' comp insurance) is a type of protection for workers. If a worker gets hurt on the job or becomes sick from work, this insurance can help. It works like a safety net, helping the injured worker by paying for things like medical bills and some lost wages.

Workers' compensation also protects companies. It protects them from being sued by employees for harmful workplace conditions. Workers receive benefits regardless of who was at fault in the accident. If a worker is killed on the job, workers comp provides death benefits to the worker's dependents.

This article provides a brief overview of workers' compensation insurance.

What are workers' compensation acts?

Each state has its own Workers' Compensation Act. These acts are designed to protect workers who get hurt or sick because of their jobs. The act outlines how the workers' compensation system should work. It covers things like how much injured workers should get paid for medical treatment for their job injuries. It also covers lost wages during their recovery. The act covers when they get benefits like permanent disability or vocational rehabilitation.

Acts are different from one state to another. In general, though, these acts work to ensure that when an employee is injured on the job, they get the help they need. Employees do not need to prove who was at fault for the injury. This is a big deal, because in most personal injury cases you must show that someone else was at fault to get compensation.

Do all employers carry workers' comp insurance?

Yes, for the most part. Almost every state requires workers' compensation insurance except for Texas, which does not require private employers to have workers' compensation insurance. 

This insurance helps pay for an injured employee's medical expenses and lost wages. Much like personal auto or fire insurance claims, an adjuster from the insurance company handles workers' compensation claims. The company pays out any workers' compensation benefits to the injured person. This is usually done in the form of reimbursement.

Remember, the rules can vary by state. For example, Illinois workers' compensation laws might differ from California workers' compensation laws. It's best to check with your local authorities or get legal advice to understand the rules in your area.

Does it matter which state I work in?

Yes, it does. Each state has different workers' compensation laws. In some places, a small business may not need to carry injury insurance. In others, it's a must. Some states also have specific rules about what kinds of injuries are covered. For example, if a car accident happens while you're working or a coworker causes a car accident, the rules about coverage could change.

Statutes in each state establish workers' compensation rules. State laws and court decisions control the program in that state, and no two states have exactly the same laws and regulations. Each individual state dictates whether workers' compensation insurance is provided by state-run agencies and by private insurance companies or by the state alone.

States also establish how claims are to be handled. They decide how disputes are resolved. States also may devise strategies, such as limits on chiropractic care, to control costs.

Do small businesses also need to carry injury insurance?

Generally speaking, yes. In many states, small businesses do need to carry workers' compensation insurance. This helps them if an employee gets hurt at work. The rules can vary based on the size and type of the business, so it's essential to know your local laws.

In most states, sole proprietors and partnerships aren't required to purchase workers' compensation unless and until they have employees who aren't owners. Most states will allow sole proprietors and partners to cover themselves for workers comp if they choose to. Some states don't require employees to be covered if they are paid solely on commission.

Many states exempt employers with only a few employees from mandatory coverage laws. The threshold number of employees that triggers mandatory insurance is either three, four, or five, depending on the state.

Who is considered an employee?

The definition of employee can vary. In general, anyone who performs work for a business in exchange for wages or other forms of compensation is an employee. Both full-time and part-time workers are considered employees under workers' compensation laws. Whether you work 40 hours a week or just a few, if you're hurt on the job you're typically entitled to workers' compensation benefits.

Many states recognize migrant workers and seasonal workers as employees for workers' compensation purposes. This means that if these workers are hurt on the job, they qualify for medical benefits. Importantly, a worker's legal status generally does not affect their ability to receive workers' compensation benefits. If you're injured while working, you have the right to seek compensation, regardless of your immigration status.

However, there are some exceptions:

  • Family Members: In some states, business owners' immediate family members, like their parents, spouse, and children, who work for them may not have to be counted as employees for purposes of determining whether they must have workers' comp insurance. These exceptions usually do not apply to other family members, such as sisters, brothers, or in-laws.
  • Contractors: Under some laws, freelancers and independent contractors are not considered to be employees. However, for the purpose of workers' comp insurance, most states will treat an uninsured contractor or subcontractor or employees of an uninsured subcontractor as an employee. This means employers may be liable if they sustain workplace injuries while working for them.

Temporary workers, such as those hired through a staffing agency, are typically considered employees of the agency and not the company where they're performing work. As such, the staffing agency would usually be responsible for carrying workers' compensation insurance.

Remember, laws and regulations vary by state and situation. If you're unsure about whether you're considered an employee for workers' compensation purposes, it's best to consult with a workers' compensation attorney. They can help you understand your injury law rights and guide you through the process.

How does workers' compensation protect businesses?

Having workers' comp insurance is not just about protecting employees. It also protects businesses. If an employee gets hurt and the business doesn't have insurance, the business could end up paying a lot of money. For example, the business could have to pay for the employee's medical care. They might be liable for future medical expenses and disability payments. It could even face a personal injury lawsuit.

If the business doesn't have enough capital to support these payments, it could result in the closure of the business. A claim for a serious employee injury could bankrupt many small businesses. Insurance, through paying premiums for workers comp coverage, provides a predictable cost for handling this risk.

Who owns workers' compensation insurance companies?

Workers' compensation insurance companies can either be privately owned or publicly owned through a government fund. This means they could either be owned by private individuals or business entities or be part of a state-run program.

Whether an insurance company is privately owned or a public fund can influence the claims process. Private insurers might be more focused on controlling costs as they aim to make a profit. They might scrutinize claims more closely or be more likely to dispute certain costs. 

Public funds, on the other hand, might be more focused on ensuring coverage for as many workers as possible. They might be less likely to dispute claims. However, they might have stricter guidelines on what types of injuries are covered. State laws regulate both types of insurers. Both are required to pay legitimate claims.

The cost of the insurance carrier can vary. This depends on how risky the business' work is and how many employees they have. Each state has its own rules about where employers may buy workers' comp insurance. In five states and two U.S. territories (North Dakota, Ohio, Puerto Rico, the U.S. Virgin Islands, Washington, West Virginia, or Wyoming), the law requires employers to get coverage exclusively through state-operated funds.

In many other states, insurance may be purchased from the state fund or from private insurers. In the states that have them, state funds may serve as an insurer of last resort for businesses that cannot find coverage from a private insurer. A workers' compensation attorney can help businesses understand their insurance needs and their state laws.

The Insurer's Perspective During a Claim

When a workers' compensation claim is filed, the insurance carrier takes on the role of reviewing and processing the claim. A workers' compensation insurer is a business. This means they have an interest in managing costs. They might do this if they believe claims are invalid or too expensive.

The insurer will review the claim. They will look at the details of the accident, the nature of the work-related injury, and the medical treatment received. They will look at all relevant details. This review process helps them determine whether their workers' compensation policy covers the claim. The insurer will also evaluate medical expenses. They check to see if the costs are reasonable and necessary based on the injury. They might dispute certain costs.

Remember, these insurers are regulated by state laws. These laws require them to act in good faith, meaning they must deal fairly and honestly with claimants. If an insurer unjustly denies a claim, they can face legal consequences.

Filing a Workers' Comp Claim? An Experienced Lawyer Can Help

If you've been hurt at work, a workers' compensation lawyer can help you file a claim. This means asking the insurance company to pay for things like your medical bills and lost wages. It might also include retraining or vocational rehabilitation. This is relevant if you can't do your old job anymore. A lawyer can also help if the insurance company denies your claim. They can help you throughout your workers' compensation case.

Sometimes, a workplace accident might lead to a personal injury claim or a personal injury lawsuit. This can happen if someone else caused the accident intentionally, like a coworker or the employer acting with malice. A personal injury lawyer can help in these personal injury cases. They can help you recover from pain and suffering, punitive damages, and permanent impairment. 

Personal injury attorneys can also help you understand temporary total disability, temporary disability benefits, and permanent disability benefits. Remember that workers' comp insurance doesn't cover things like slip and fall accidents that aren't work-related, car accidents that happen while you're not working, or medical malpractice by a medical provider.

Contact a workers' comp attorney today to learn about your legal options.

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