The Importance of Workers’ Compensation Insurance

The Importance of Workers’ Compensation Insurance

Workers’ compensation insurance protects employers from lawsuits for injuries and illnesses that occur on the job. It covers lost wages, medical expenses, and death benefits in the event of a work-related injury or illness. Although it’s necessary to protect employers against such claims, it is also a highly susceptible area for insurance fraud. This article will explain the importance of workers’ compensation insurance and what it can do for you. The cost of work-related injuries and illnesses to U.S. businesses is nearly one billion dollars each week.

Work-related injuries and illnesses cost U.S. businesses a billion dollars a week

According to the Liberty Mutual Safety Index, workplace accidents and illnesses cost U.S. businesses $1 billion a week. The rate of injuries has risen in some states, including Alaska, Wyoming, North Dakota, Montana, and West Virginia. In Pennsylvania, the maximum compensation for the loss of an eye is $261,525; in Alabama, it is $27,280. In many states, employers have great control over medical decisions, and they are not allowed to choose their own doctors. In addition, employers can demand that any medical determination be reviewed by “independent medical examiners,” which have the authority to challenge the doctors’ findings. In many cases, workers and their families must pay for their own medical bills, and they will have to pay out-of-pocket expenses if they don’t receive proper care.

The toll of work-related injuries and illnesses is far too high. Too many workers are in danger of death or serious injury in the workplace. In the United States alone, more than 275 workers died every day due to unsafe conditions, and there were nearly 965,000 cases of occupational diseases. In the last five years, workplace violence is the third leading cause of death and illness. In 2010, employers reported nearly 3.5 million workplace injuries and illnesses.

Workers’ compensation insurance covers lost wages, medical treatment, and death benefits

Workers’ compensation insurance covers medical treatment for injured employees and provides partial death benefits in the event of an accident. Several states require employers to purchase workers’ compensation insurance for employees over 2 and for all workers. The law covers full-time employees, part-time and temporary workers, and trainees and uninsured contractors. The cost of this insurance varies but is typically based on payroll and state-set rates.

The premiums for workers’ compensation insurance have increased more than twice the rate of the medical CPI over the last decade. In fact, in some states, the percentage of insured employees covered by workers’ compensation insurance increased by more than 67 percent. But in the most recent recession, premiums dropped significantly because payrolls fell by fewer than one percent. Because the recent recession has been the worst in 60 years, premiums are likely to fall again soon. The 1970s and 1980s were relatively benign, because wages had risen.

It protects employers from lawsuits

Workers’ compensation insurance protects employers from a variety of lawsuits. While this insurance will pay for medical expenses, it will also protect you from lawsuits from third parties who may be affected by an employee’s work-related injuries and illnesses. In addition, this type of insurance will cover any costs associated with the legal proceedings. Employee lawsuits can range from third-party injury claims to loss of consortium claims resulting from a spouse’s workplace injuries. A third-party lawsuit can also come from a spouse who feels that the employer’s carelessness caused the employee’s disability.

Fortunately, there are many different ways to obtain workers’ compensation insurance. In most states, employers can “self-insure” this type of insurance. This type of policy requires a high annual premium and meets stringent qualification requirements. Employers should also ask for a quote for this type of policy in advance so that they can determine the cost for coverage. If you have a high-risk work environment, it will cost you more than if you were to hire an insurance company to cover your needs.

It is susceptible to insurance fraud

The fraudsters who attempt to defraud workers’ compensation insurance have many methods. Whether they are employees or employers, it can take a variety of forms. Fraudsters can conspire with one another to inflate claims to obtain a lower premium than the real exposure. They may also knowingly provide false information about processes and operations performed by the workforce. The fraudsters’ actions create an environment of opportunity and unsuspecting innocents. Regardless of the method used, the result is always the same: the insurance company carries the cost of these false claims. They then pass the costs onto policyholders, taxpayers, and the general public.

Unfortunately, not all fraudulent activities make it onto the radar of regulators. Some fraudulent activities are so blatantly obvious that it’s nearly impossible to prove whether or not an insurer has committed fraud. The fact that few convictions have occurred demonstrates how polar opposite approaches to workers’ compensation insurance are. In Texas, the workers’ compensation requirements are relatively simple, while California’s program is the most comprehensive in the country.


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