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Five Thing You Need To Know About Workers' Comp

Even though it is designed to protect employees, employers often view workers' compensation insurance with confusion, frustration and anxiety. But discovering the facts about workers' compensation can help alleviate your fears and make your job a little easier.

  1. It's the law.
    Worker's compensation insurance is legally required in all fifty states. That being said, the statutes that govern workers' compensation are determined by state government, not the IRS. Consequently, some states offer a statewide workers' compensation program while other states rely on private insurers. Contact your state insurance commissioner or local insurance agent to learn how to obtain workers' compensation coverage as well as information about the specific rules that apply in your state.
  2. Worker's compensation protects your company.
    The purpose of workers' compensation insurance is to protect your employees from the undue burden of health costs incurred by a work-related injury. However, workers' compensation also protects your company by shielding you — the employer — from being sued for expenses that are covered by the policy. Without workers' compensation coverage, you could be held liable for the entire amount of healthcare costs in the event of a work-related injury. By viewing the cost of workers' compensation as an insurance investment, you may find it easier to see it as a benefit rather than a liability for your company.
  3. There are exemptions.
    Depending on the legal requirements in your state, not all employees are required to be covered by workers' compensation insurance. Coverage is usually mandated for full-time employees, but part-time employees and contractors may be exempt. There are also limitations regarding the kinds of expenses that are covered by the workers' compensation policy. In some cases, workers may be eligible for lost wages and survivor benefits.
  4. You can reduce your workers' compensation costs.
    At first glance, workers' compensation premiums would seem to be a fixed cost of doing business. After all, you are legally required to carry it no matter how much it costs. However, you may be able to reduce the cost of your premiums depending on your industry's risk factors and safety record. Make sure your business is classified in the appropriate risk category and ask whether additional safety precautions will reduce your premiums. This is especially important if your business has a poor safety record and has been placed in a high-risk pool. Another way to reduce premiums is to agree to a higher deductible. You might be surprised — a slightly higher deductible can reduce your premiums by as much as 25%.
  5. If you suspect fraud, report it immediately.
    It's no secret that workers' compensation fraud exists. Although most people who apply for workers' compensation benefits are sincere, some are simply trying to be compensated for bogus claims. If you suspect an employee is submitting a false unemployment claim, contact your workers' compensation insurance provider immediately. It's in your best interest and the best interest your other employees.