What’s Up With Workers Comp?
We all know accidents happen, even though we try to prevent them. However, when they do happen, we need to make sure everyone is protected, both employer and employee. That’s why we have workers compensation insurance.
Workers compensation insurance can be a little confusing. What is covered by the insurance? How are premiums determined? What needs to be done when an accident occurs?
Although workers compensation laws are specific by state, the principal protection and procedures remain the same in most states. These laws were created to protect the employee from job related injuries and to eliminate costly litigation against employers.
Parts Of A Workers Comp Policy
A workers compensation policy is generally made up of two sections, Employee Benefits and Employer’s Liability.
The Employee Benefits section covers protections for the employee. The compensation must pay for all of the injured employee’s deductibles or co-payments and all medical bills. The insurance carrier must provide the injured employee with lost wages, which were caused after a work related injury. If the employee should perish from a work related injury, the carrier must provide a death benefit.
The Employer’s Liability section addresses employer coverage if the injured employee forgoes the employee benefits. In this case, the workers compensation carrier will provide for legal defense costs for the employer and provide up to the policy limits for settlement awarded to the employee.
Who Needs Workers Comp Insurance?
Each state determines who needs to have workers compensation insurance. But, a word of warning, just because you are not required to carry a workers compensation policy by law, doesn’t mean you can’t be
held responsible for work related injuries. If an employee is injured, and you don’t have a policy, you may find yourself defending a lawsuit or responsible for the injured employee’s medical bills on your own.
How Is The Cost Determined?
The employer’s business operations are used to establish a primary classification code for each employee. For HVACR companies; clerical office employees, traveling salespersons, and drivers are exceptions to this classification.
Don’t forget 1099 subcontractors are treated as employees in the premium calculation if the employer cannot provide proof that the subcontractor protected his employees with his own coverage. Protect yourself by keeping an updated certificate of insurance on file for each subcontractor.
There is also an experience modification factor that comes into play. It is a debit or credit factor applied to your workers comp premiums. Data is collected on workers comp claims experience and by the employer’s loss experience. Although the method in which this rate is calculated is somewhat complex,
the function is basic. The experience modification factor compares a company’s actual losses to expected losses by the industry type. If an employer has a good claims record, an experience modification factor will create a credit, reflected with a factor of less than 1. However, an employer with a claims history will generate a debit factor.
Work with your agent to ensure claims have been accurately reported. It’s also a good idea to develop the following programs and inform your agent of them:
- A written safety and loss prevention program for all employees, that includes proper equipment and training and regular meetings to review procedures and responsibilities.
- An accident investigation program which includes self inspection, written documentation, and digital photo documentation of all incidents.
- A safety compliance enforcement program.
When To File A Claim
If an employee reports a job injury, have them seek immediate medical attention. At the medical facility, have them provide your policy number. You should contact your agent immediately to report this claim. Have the facts about the incident and employee pay details available at that time.
Remember, it’s to your benefit to have the injured employee return to work as soon as possible. Employers know it costs more in productivity every hour an employee misses. It can also impact employee morale knowing they have to pick up slack for the injured employee. Finally, the longer an employee is missing, the larger the claim becomes, which will impact the employer’s ability to maintain insurance. Develop a return to work program, which allows the injured employee to re-enter the work force with light duties, thus reducing your claim.
By protecting your employees from possible injury, you can help control the cost of a workers compensation program.
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