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Workers Compensation Insurance
Workers Compensation is a mandatory coverage for employers that provide protection for your employees in the event any work-related injuries occur. In addition, it ensures that your employees can obtain the medical attention they need to return to work as quickly as possible. No matter who is at fault, the employee can generally receive Workers Compensation benefits, which provides the employee with no right to sue you as the employer.
Employers, who comply with the Workers Compensation mandates, are given certain common law defenses. Employees working for employers who have Workers Compensation Insurance, simply by their employment, agree to Workers Compensation being the only way they may seek for injuries. Even if the employer was in the wrong and it led to a work-related injury, Workers Compensation Insurance will only pay for the injured employee’s medical bills and wage loss.
An important note to remember is that employers who fail to secure Workers Compensation Insurance for their workers also give up the common law defenses, and employees injured in the scope of employment may seek non-economic damages like pain and suffering claims. If the employer does not have Workers Compensation Insurance, he will also have no insurance for legal defense and the cost of a defense attorney will lie solely on him. Because Workers Compensation is designed, by law, to be compensatory in nature, courts will typically side with the injured worker (unless fraud can be proven), leaving a hefty bill at the feet of an uninsured employer. Penalties of $2,500 and up to 1 year in prison can be assessed for each occurrence, on top of the employee claims the employer is ordered to pay. In some cases, each day an employer does not carry Workers Compensation could be assessed as a separate occurrence.
Ask your agent about the extra programs your insurer may have in place for Workers Compensation. Knowing this information and gaining some knowledge of the basics of workers compensation can help you protect your business and even help keep your claims costs low. For example, loss control and safety seminars may also be provided by the insurance company as a way to keep claims costs lower. Employers implementing regular safety meetings may see premium reductions, and avoiding losses will positively affect modification factors and provide additional credit to the policy. Learn about more ways a Workers Compensation policy can protect your business.
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Frequently Asked Questions
If I am self-employed, do I need to carry Workers Compensation insurance on myself?
No, if you are self-employed you are not required to carry Workers Compensation; however, the State of Pennsylvania now allows sole proprietors to purchase workers compensation for themselves.
I pay my employees with a 1099, why do I need Workers Compensation?
The key word here is employees; the fact that you pay workers on a 1099 does not automatically exclude you from Workers Compensation mandates. Whether or not you are required to carry Workers Compensation depends on if you have established an employer/employee relationship. Paying workers by the hour instead of by the job, workers having no risk of financial loss within the performance of a job, dictating a worker’s hours or their coming and going, or a worker using your equipment to perform the work all are situations that define an employee, not an independent contractor.
How long will my injured employee receive benefits?
In certain situations, wage loss benefits are payable for over nine years, and medical bills are potentially payable for life. In some scenarios, workers may be able to return to work in a limited capacity, which can help reduce claims.
I believe my employee got hurt over the weekend, but is saying it happened at work to receive compensation, what can I do?
Your insurance company may, or may not, choose to investigate the claim. It is believed that as more people are required to get health insurance through the Affordable Care Act, less Workers Compensation fraud will occur. All insurance companies have numbers to report fraud.
How is my Workers Compensation premium calculated?
Your Workers Compensation premium is calculated based on your annual payroll. You will pay a certain dollar amount per $100 of remuneration. Each compensation class will have its own rate that is adjusted off the state’s base rate considering insurer loss experience for that particular classification. So an employer with a class rate of $5.00 and a payroll of $100,000 would pay $5,000 in premium (before modification factors, employer assessment and other fees are added) ($5.00 X 1,000 hundreds=$5,000).
My mod factor is 1.0, is that good?
If your mod is 1.0 you aren’t paying a surcharge, but you are not receiving any credits either. If the lowest mod you may realize for your classification is .75, you are potentially leaving a 25% credit on the board. Working with your agent and/or your insurance provider and implementing safety committees and best practices can hopefully decrease your claim volume and help you realize the maximum credits available to your class of business.
I just started my business and I need Workers Compensation, what are my options?
Unfortunately, many insurers are reluctant to write Workers Compensation for new startups because there is no prior history to base claims potential on. Usually, but not always, the options for new employers are limited to the State Workers Insurance Fund (SWIF). SWIF rates are typically higher than most private insurers; however, it may be the only option in order to stay in compliance. Once the employer has a year of experience, private insurer options usually open up, and their Workers Compensation coverage can then be placed elsewhere.