Workers’ compensation is a state-regulated program, and is required of certain employers by law in most states. It covers wage-loss benefits, medical treatment, and rehabilitation for employees who suffer a work-related injury or illness. Workers’ compensation also includes employer liability coverage, meaning that employees who receive these workers’ compensation benefits cannot file suit against their employer in connection with the work-related injury or accident, with few exceptions.
When an employee suffers a work-related injury or illness, the workers’ compensation policy covers the costs of the employee’s wages and medical care, and many workers’ compensation policies have programs which help to facilitate recovery and expedite return-to-work.
Premiums for workers’ compensation are determined by business classification and payroll. Classifications group businesses with like businesses, and these classification categories and determined by rating bureaus. Payroll is determined on an individual basis by a premium audit. A premium audit typically includes the insured submitting information about the business’s owners/officers, employee gross payroll, job descriptions, and subcontractors. When an audit is completed, the insured receives a statement that outlines the classifications, payroll amounts, rates, and other policy changes.
Cost Management
There are several ways an employer can manage the cost of workers’ compensation.
- Choose your insurance agency carefully. Exclusive and captive agents are limited to offering only one carrier for workers compensation, while independent agents represent multiple insurance companies, and have the ability to compare policies for the best value.
- Implement a formal safety program. Many employers who implement safety measures, such as written safety procedures, prompt claims reporting, and return-to-work programs, find that they are able to effectively reduce the costs of workers’ compensation.
- Talk about safety with your employees. Provide training for injury prevention, and allow for meetings that address safety issues.
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