As a small business owner, you need to ensure your workers are safe and protected on the job. That’s why having appropriate workers’ compensation insurance is absolutely critical. In case of a workplace injury, workers’ comp insurance helps protect your business and helps your injured employee get the proper recovery assistance. That said, what types of injuries actually qualify to be covered by workers’ comp? Good question.
A “compensable injury” is a work-related injury that qualifies an employee for workers’ comp benefits. However, what counts as a compensable injury is not always clear. If you’re a business owner, you should consult with your insurance provider, state workers’ compensation board, and/or legal counsel regarding individual workers’ compensation claims.
To help you get started, here’s a detailed overview of what workers’ comp typically covers, plus a look at compensable injuries versus non-compensable injuries.
Is workers’ compensation insurance required for my business?
Workers’ comp insurance is legally required for most small businesses with employees—even if you may not view your employees’ jobs as “high risk.” If you’re a small business owner, your business will likely be required to carry workers’ compensation insurance depending on the laws in your state. If you’re unsure whether your business should carry workers’ comp injury coverage, here’s a handy list of questions for business owners and insurance agents to walk through together:
- Do you have any employees?
- If so, how many employees do you have?
- What is your business structure (sole proprietorship, limited liability corporation, partnership, single-member, multiple-member, etc.)?
- Are you an independent contractor, contractor, or subcontractor?
- Does your business have executive directors, executive officers, or board members?
These questions should give you a general idea of whether your business is legally required to have workers’ comp coverage. Be sure to complete your due diligence and fully research the requirements in your state. If you’re still in doubt, consult a workers’ compensation attorney for clarification and reassurance. Remember, if you don’t have the required insurance coverage for your employees, you may face fines or even imprisonment.
What does workers’ comp cover?
Workers’ compensation helps cover medical, rehabilitation, and disability expenses for workers who suffer compensable injuries due to their job. Workers’ compensation may also provide death benefits to an employee’s family or dependents if they are killed in a work-related incident.
In addition to helping employees and their families, workers’ compensation insurance can also help protect small businesses. Workers’ compensation protects businesses from financial liability for employee workplace injuries. Plus, it can keep employers from having to pay directly out of pocket for those workers’ comp injuries.
Covering an injured employee’s medical fees could be devastating for a small business that doesn’t have appropriate coverage. By finding the right insurance provider for your business, workers’ comp can help you avoid huge financial loss in the long run.
Workers’ compensation insurance rates range widely—from $0.57 in Texas to $2.32 in Alaska per $100 of covered payroll. These amounts are the average employer cost for workers’ compensation.
What constitutes a workers’ comp injury?
Once again, the definition of compensable injuries depends on the laws in your state. In general, to be considered compensable and, therefore, eligible for workers’ compensation coverage, injuries must:
- Have happened to an employee (not a vendor or independent contractor).
- Be the result of a workplace injury or illness during the course of employment.
- Result in impairment and/or lost wages.
If the injury does not meet these requirements or is not otherwise covered under your state’s workers’ comp laws, it is considered a non-compensable injury and the employee will not qualify for workers’ comp benefits.
If you are an independent contractor, you must ensure you have your own workers’ compensation insurance. In fact, most businesses require you to have your own insurance before issuing a contract. This is to protect themselves from liability in case you get injured on the job.
Although you may not be legally required to have workers’ compensation injury coverage in your state as an independent contractor, it’s a smart idea to protect both your business and your employees.
What types of injuries are covered by workers’ compensation?
Work-related injuries that may be covered by workers’ comp (depending on your state) include:
- Repetitive stress injuries (e.g. carpal tunnel syndrome, tendonitis, bursitis)
- Occupational illnesses (e.g. asbestosis, silicosis, sunstroke, hearing loss)
- Mental stress injuries (e.g. anxiety, emotional distress, post-traumatic stress disorder)
- Fatality (e.g. fall from scaffolding, chemical exposure)
Please note that this is not an extensive list of compensable injuries. Eligibility will depend on both state laws and your specific workers’ compensation coverage. Make sure that you speak to your insurance agent and/or provider about what workers’ comp injuries are included in your policy.
What is not covered under workers’ compensation?
What is not covered under workers’ compensation insurance also varies by state, but there are general boundaries. Typically, injured employees will not be covered if they were:
- Under the influence of drugs or alcohol
- Engaging in horseplay or fighting
- Commuting to or from work in a private vehicle and not engaged in work activity
- Participating in a voluntary, unsponsored social gathering with coworkers
- Taking a work break off-site
Remember, every situation is different and state workers’ compensation laws vary considerably. Do your research as an employer and speak with a trusted advisor.
To learn more about the laws that affect your business, you can view this state-by-state comparison of workers’ comp laws. This useful resource is maintained by the National Federation of Independent Business (NFIB) and provides links to each state agency.
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