Top 10 Workers' Comp Insurance FAQs

Workers' compensation is an essential coverage for most types of businesses that rely on employees. But this coverage can also be complex and confusing. That's why it's important to know the details about workers' compensation insurance before you ever get a policy.

Whatever your industry, these common workers' comp questions can provide helpful guidance. An independent insurance agent can also answer your remaining questions and help you find the right workers' comp coverage for your business. But first, here are answers to the top 10 most frequently asked questions about workers' comp coverage.

What Is Workers' Compensation Insurance?

Workers' compensation insurance is a policy obtained by an employer to pay for medical expenses for employees who get injured or ill while working, or otherwise due to job-related activities or the job site. Most states make coverage a mandatory requirement if a business has a certain number of employees, depending on the business structure and industry.

Workers' comp not only provides protection for employees on the job, but for the employer, too. If a business covers its workers with a workers' comp policy, the employees automatically forfeit the right to sue the business for a work-related injury or illness in exchange for these benefits. Having workers' comp exempts a business from lawsuits filed by employees or their family members for incidents that lead to injury, illness, disability, or death.

What Does Workers' Compensation Cover?

Workers' compensation coverage can pay for medical care and replace a portion of weekly wages for employees who get injured or ill due to their jobs. Workers' compensation benefits also can include disability benefits in many cases, as long as the disability was caused by the job in some way. 

Workers' comp policies can cover the following:

Workers' comp can typically replace up to two-thirds of an employee's typical wages during the time they need to take off work for treatment of a job-related injury, illness, or disability. Various types of medical expenses, including doctor and hospital visits and prescription medications, are usually compensable. 

What's Not Covered by Workers' Comp Insurance?

It's helpful to understand what your policy covers before ever filing a workers' compensation claim. Workers' comp typically excludes coverage for the following:

• Injuries that were sustained while an employee was intoxicated
• Intentional or dishonest employee acts that led to injury or illness
• Injuries that were sustained because an employee started a fight at work
• Injuries, illnesses, etc., that occurred due to an employee's negligent acts
• Emotional injuries and mental health issues that weren't caused by physical workplace trauma
• Injuries, illnesses, and disabilities that aren't caused by job duties or the work environment

Injured workers can get compensation for medical treatment after an on-the-job incident occurs in many cases. However, if the incident was caused by intentional acts or negligence on the employee's part, the injury or illness is unlikely to be covered by workers' comp.

Which Employers Are Required to Carry Workers' Comp Insurance?

It depends on your state's laws. Most states require businesses with a certain number of employees to carry workers' comp. But there are certain exceptions, for example, agricultural businesses are sometimes exempt from coverage requirements.

Whether your business is required to offer workers' comp to its employees can also depend on your company's structure and the type of employees it hires. Corporations, LLCs, and sole proprietorships typically have different coverage requirements. 

Further, your state may specify its workers' comp requirements by employee classification. For example, a business may be required to obtain coverage if it has at least three full-time employees, but be exempt from needing coverage if it has just one part-time worker. 

It's important to ask your independent insurance agent to help you review your state's laws about which businesses are required to have coverage, and how coverage works for any out-of-state employees.

Does an Employer Need to Pay for Workers' Comp for a 1099 Employee?

Business owners are not required to pay an additional premium on their workers' comp policy for any hired subcontractors, as long as they collect the proper certificates of insurance. These documents show the insurance policies and limits of coverage that subcontractors have. Always ensure that any subcontractors you hire are equipped with their own workers' comp insurance.

Independent contractors and sole proprietors are sometimes required to get coverage under their state's workers' compensation laws. For example, California requires certain types of contractors to carry workers' comp, even if they're sole proprietors with no employees. Make sure to review the workers' compensation laws in your state.

What Is a MOD and How Does an Employer Get One?

A MOD, or an experience modifier, is basically a scorecard of the employer's frequency and payout of claims and determines how high their premium will be. A MOD is typically assigned after three years of having a workers' comp policy with a premium of $5,000 or higher. 

Not all employers qualify for MODs. The National Council on Compensation Insurance (NCCI) assigns experience modification factors to businesses. An independent insurance agent can help you determine your business's eligibility.

How Do I Get Workers' Comp Insurance?

You can typically buy workers' comp coverage from a private insurance carrier or through a state-funded program. The insurance company you get your business insurance from likely sells workers' comp insurance, depending on your state. If your business is located in North Dakota, Ohio, Washington, or Wyoming, it's required to obtain coverage from a state program. 

Your business may also choose to be self-insured. Self-insurance requirements can be satisfied with a workers' comp ghost policy, if your business is eligible. A ghost policy provides a certificate of insurance (COI) without actual benefits. 

Having proof of coverage can allow your business to make contracts with prospective clients who might otherwise decline to work with you. LLCs, sole proprietors, independent contractors, and other self-employed individuals with no employees often use ghost policies.

How Can a Business Get a Workers' Comp Exemption?

In certain circumstances, your business may be eligible for a workers' comp exemption. It depends on your state's workers' comp laws. In many cases, businesses with zero employees are not required to have coverage. 

However, LLCs that only employ family members are also usually exempt from workers' comp requirements. Businesses in certain industries may also be exempt from coverage, regardless of the number of employees.

Does Workers' Comp Cover Time Off Work to Get Medical Treatment?

If you've ever been injured on the job, you may have asked, "Should my employer be paying me while I see the doctor?" The answer can be a little complicated. Workers' comp laws often require a seven-day waiting period after an injury occurs in which the business doesn't have to pay the employee for missing work. 

For minor injuries that allow an employee to return to work within a week, the business is typically not required to pay them for any missed work. However, if an employee must miss work for eight days or more, they're usually entitled to compensation for time off work through the employer's workers' comp policy.

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How Much Does Workers' Compensation Cost?

The cost of workers' compensation insurance can vary based on a few different factors. However, many businesses with less than $300,000 in annual payroll pay an average of $81 per month for workers' comp coverage. Your business's premium rates can be determined based on the following factors:

An independent insurance agent can help you find affordable workers' comp insurance near you.

An Independent Insurance Agent Can Help You Find Workers' Comp

When it's time to find the right workers' comp insurance for your business, no one's better equipped to help than an independent insurance agent. These agents have access to multiple workers' comp insurance companies, so they're free to shop and compare policies and rates for you.

They'll get you matched to a policy that offers the best blend of coverage and cost. And down the road, your agent will still be there to help update your coverage as your business's needs evolve and can even file workers' comp claims for you.