Workers' Compensation insurance provides financial security for your business if an employee is injured or becomes ill from job-related situations.
In short, it works like this. Employees relinquish their right to sue employers if they suffer a job-related injury or illness. In return, employers agree to provide state-mandated benefits for that injury or illness.
Most workers’ compensation insurance policies actually provide the following types of coverages:
- Employers’ Liability Coverage. This additional coverage protects your business in case you are ever sued for an employment-related accident or illness if it is proven that your business was legally responsible for the injury or disease.
- Accident-Bodily Injury. This is the limit of coverage an insurance company will pay for all claims arising from any one accident, regardless of how many employees are involved in the accident.
- Disease-Bodily Injury. This is the limit of coverage an insurance company will pay for all claims arising or caused by disease regardless of how many claims are reported.
- Coverage for Other States. If the employer selects this coverage and employment arises in other states that were undeclared when the policy was originally issued or renewed, the employer is covered as if that state was originally listed on the policy when it was issued.
- Experience Modification. This is a factor that helps determine the cost of the workers' compensation policy based on the employer’s history of workers' compensation claims. The higher the experience modification factor, the higher the cost may be.
- Owners and Officers Exclusion. In some states, workers' compensation law allows an employer to include or exclude owners, officers and partners from coverage.