Small Business Brief


Who Pays for Workers Comp Insurance? Your Questions Answered

There were 2.8 million nonfatal workplace injuries in the US in 2018, a figure that is relatively consistent from one year to the next.

Plainly, this is a huge number which represents a very real risk for both employers and employees. Aside from the pain and trauma of a workplace injury, there are huge financial implications when someone gets hurt in the workplace.

One way to address this risk is by taking out a workers’ compensation insurance policy.

So, who pays for workers’ comp insurance? Read on as we look at the answer to this question and share a little information on the topic of workers’ compensation more broadly.

What Is Workers’ Compensation?

If an employee suffers an illness or injury due to activities at work, workers’ compensation will cover their expenses.

It is the responsibility of employers to pay workers’ compensation. It is an offense for an employer to withhold payment from a worker where they suffered harm while carrying out their duties.

Workers’ compensation will cover any initial medical costs incurred in relation to an injury, as well as a portion of ongoing care requirements. It also covers payments made to the employee as compensation for lost earnings.

Many employers might struggle to provide a worker with adequate cover in the event of a serious injury. To address this, insurance companies provide workers’ compensation policies.

When Is a Worker Entitled to Workers’ Compensation?

As long as an injury or illness results directly from the working activities of an employee, they should be entitled to workers’ compensation. 

To secure an entitlement to workers’ compensation, an employee must prove two things.

Firstly, they must show that they suffered an injury. Secondly, they must show that this injury would not have come about only for their workplace activities. 

An issue arises in cases where the causation of an illness or injury is unclear. An employer is not required to provide compensation in respect of an injury that an employee suffered other than through work.

In some cases, such as a fall resulting in a broken leg, there will be no difficulty here. However, not every condition results from a cause as clearly as this.

Repetitive strain injuries are the classic example of this. Where a worker suffers from a condition like chronic pain which arises over a long period of time, it may not be obvious what caused it. While workplace activities may have been a factor, unrelated activities outside of work may have been the ultimate issue.

Because of the difficulties in establishing causation, workers’ compensation is less common in respect of mental illnesses.

Many people suffer issues like anxiety and PTSD after an incident at work. However, unless you can point to a single incident and a notable drop in mental health directly afterward, it may be difficult to secure compensation.

Who Pays for Workers’ Comp Insurance?

Workers’ comp insurance is coverage that is available to employers.

While it will pay for the medical care and wage replacement that an injured employee requires, it covers the financial obligations of employers. It, therefore, falls to employers to take it out and pay for it.

While some employers may view workers’ compensation insurance as an unwanted cost, it is productive to take a broader view.

While no business owner is on the lookout for extra bills to pay, workers’ compensation insurance keeps businesses protected from the costs of worker injuries, which can often be astronomical.

This is a particularly high risk in workplaces that involve physical labor. If you run a building site, for example, and one of your operatives falls from a height, he or she could end up permanently paralyzed.

Such an injury could leave you paying for wage replacement and medical bills for the rest of that worker’s life. Covering this cost without insurance could leave you bankrupt.

In any case, workers’ compensation insurance is mandatory for most businesses in most states. However, if your business is exempt, you should still consider taking out coverage.

What Does Workers’ Compensation Insurance Cover?

If a workers’ compensation claim is successful, the insurance policy should cover most of the related costs. This includes medical expenses and wage replacement.

The employer will only have to pay for the deductible amount, which will be specified in the policy.

While workers’ compensation insurance will cover most of these costs, an employer will still feel some financial pain. 

Insurance companies calculate their premiums on the basis of risk. The minute an employer makes a workers’ comp claim, their perceived level of risk goes up, which means that their premium does too.

This means that employers will often challenge workers’ comp claims that they feel are not entirely solid.

Insurance companies may also mount such challenges. Their business model relies on paying out on as few claims as possible.

For this reason, legal disputes in relation to workers compensation claims are common. If you’re involved in a contentious claim, whether as an employer or an employee, you should hire a lawyer immediately.

Getting the Coverage You Need

So, who pays for workers’ comp insurance? As you can now see, this is the responsibility of the employer.

However, it’s important to take a broad view when considering this issue. While workers’ compensation insurance might be an unwanted expense in the short run, it could end up preventing crippling costs if disaster strikes.

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