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Worker compensation insurance is a mandatory insurance policy for any business employing one or more workers. The worker compensation system is a no-fault system, in that, an injured employee does not need to prove that an injury was the fault of another’s in order to receive worker’s compensation benefits for an injury which occurred on the job. Worker compensation insurance protects both the employee and the employer. The insurance policy is designed to benefit the employee in the case of an on the job injury and protects the employer even if the injury was caused by negligent actions on the employer’s behalf. Worker compensation insurance is composed of three basic structures, benefit structure, benefit delivery, and benefit financing.
- Benefit structure: This part of the worker’s compensation insurance policy defines the entitlement due to an employee if said employee was injured because of, or in during, employment. This structure is divided into five basic benefit types which are dependent and allocated based on the severity of the injury in question and are as follows: medical care, temporary disability benefits, permanent disability benefits, vocational rehabilitation services, and death benefits.
- Benefit delivery system: Benefits due to an employee for compensation of an on the job injury are administered by private parties. This means that any benefits received as compensation for an on the job injury will be paid by an insurance company which is authorized to transact workers’ compensation liability. In the case of an injured employee, it is the responsibility of the employer to begin the process of providing the injured employee the benefits which he or she is legally entitled under the law. Benefits will be paid by the employer’s contracted insurance company, or in the case of a self-insured business by the employer themselves. In order for a company to qualify to be self-insured the company must first seek state approval. That approval is dependent on a company having a net worth of $5 million, a net income of $500,000 per year and a posting of a security deposit. The state is responsible for overseeing the provisions of workers’ compensation benefits, and provides information and assistance to both employees and employers or any others involved in the system, and to aid or resolve disputes which may arise during the process of claiming or distributing benefits arising during the process.
- Benefit financing system: There are three main choices for financing workers’ compensation insurance, self-insurance, private insurance, or state insurance.
Most states do not regulate premium rates and there will be rate variation from carrier to carrier. In addition to cost some things to consider when choosing insurance companies are, services provided, ease of access to the adjusters, their familiarity with your industry, and the doctors in their network.