Why Have Workers' Compensation Insurance?
Workers compensation insurance exists to protect workers and provide compensation to employees who get injured while working on the job. This type of insurance also exists to protect a business from liability as a result of lawsuits from injured employees. Employers pay the premiums for workers compensation as a cost of doing business. Employers with more than one employee are required in all states to have workers compensation insurance.
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Beginning
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The need for a program for workers compensation began with requirements that were established during the early part of the 20th century. Prior to established requirements, individuals that were hurt on the job had to suffer or take their employer to court. This presented problems for most people who could not afford the cost as well as employers that were found at fault. As a result, a compromise was developed by the states that began in 1911.
Modern Laws
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Modern laws in each state provide various types of benefits to employees or workers who become injured or ill and apply for workers compensation coverage. Benefits that are provided to workers typically include medical expenses, death benefits, wages that are lost and certain types of rehabilitation services as provided by various state law. A business that fails to have a workers compensation policy in force can face fines and out-of-pocket costs for worker benefits.
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Sole Proprietors and Partnerships
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An individual that is a sole proprietor or is in partnership with another individual or group of people is not required to purchase workers compensation in certain circumstances. These types of businesses are typically not required by state laws to purchase workers compensation insurance until a business has employees who are not also the owners. States may give the option for these types of businesses to purchase a workers compensation policy, but it is not required.
Self-insurance
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Many states provide the option for large corporations to choose to self-insure instead of purchasing a workers compensation policy. These rules for self-insurance will vary depending on the laws in a particular state. Self-insurance requires a company to have reserves set aside to cover any losses that occur, which will need to be accounted for in financial statements. As a result, nearly all companies that have employees will purchase a workers compensation policy.
Workplace Safety
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Employers can limit their need to provide workers compensation to an injured worker by taking steps to provide a safe working environment. This can be done by taking time to discuss workplace safety at regularly scheduled meetings with management and employees. Workplace safety needs to be a shared concern by both management and employees. An employer should also analyze workplace injury trends that exist in similar businesses to help limit any claims that may occur.
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