Understanding Workers' Compensation Insurance
Workers' compensation insurance is a type of insurance that provides medical care for employees who are hurt while performing their job duties. Started in Germany in the 1800's, workers' compensation insurance responds to a need for workers to be protected against economic hardship in the event of injury while working for their employer. In exchange for this coverage, the employees surrender their right to sue the company for punitive damages due to negligence and general damages for pain and suffering, in a compromise known as "the compensation bargain".
Workers' compensation insurance is usually distributed to the injured worker as weekly payments in place of wages, thus acting as a type of disability insurance. There may be more compensation paid for economic loss (past, present, and future), hospital expenses (a type of health insurance), and benefits to the dependents of workers killed during employment (a type of life insurance).
The cost of workers' compensation insurance is determined by the workers' compensation board of the respective state. Base rates do differ from state to state, but the process each state uses to calculate base rates is very similar.
In order to determine base rate, risk classification must first be determined. Every job occupation is assigned a risk classification, which is determined by two statistical factors: the frequency of on-the-job injury and the severity of injury. Severity is determined by medical payments and indemnity benefits. Once assigned a dollar sum, the risk classification of a given profession is multiplied by 1 percent per $100 of the employee's payroll in order to achieve base rate. So, an administrative assistant's risk classification is about $1.25 per $100 paid. If this person receives $650 per week, the workers' compensation insurance premium for that person costs about $8.13 per week.
The base rate may be lowered with time depending on the employee's safety history, and if the business also provides health insurance. State workers' compensation insurance will also vary depending on that particular state's safety history.
Workers' compensation insurance is not a benefit of employment; rather, it is a right. Businesses are legally required to offer workers' compensation insurance, and those that do not face stiff legal ramifications if discovered. Policies may be purchased from several places: private companies, state funds, insurance pools, and even individual insurances.
On its own, workers' compensation typically results in monetary loss for most insurance carriers. Many insurance companies compensate for this loss by requiring the business owner to buy additional policies in addition to workers' compensation.
Most states require that an official notice be posted in the workplace informing employees about workers' compensation and what payment is offered for job-related injuries. Business owners should check with regulatory offices or their city hall to find out if such notices are required to be posted; failure to post notices may result in a fine.
About the Author
Tanya Wiseman writes articles for:<br>Business General Liability for Medical Offices<br><br>Or see more information on this blog:<br>Tips on General Liability Insurance Underwriters
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