Who Pays for Workers' Comp Insurance?

Whether you're a prospective business owner or an employee, you may be wondering, "Who pays for workers' comp insurance?" No matter where a business is located, the employer is responsible for paying for workers' compensation insurance coverage for its employees. However, state requirements for this coverage vary by state, so not all businesses may carry workers' comp.

A local independent insurance agent can help your business get equipped with the right workers' comp policy. They can shop and compare coverage options and rates for multiple carriers to ensure you get the ideal amount of coverage at the best rate. But first, here's a closer examination of who pays for workers' comp coverage and why.

Do Employees Have to Pay for Workers' Comp Insurance?

Employers are always responsible for paying for workers' comp premiums, regardless of the state the business is in. For regular staff and employees, workers' compensation insurance is paid for by an employer as a form of accident insurance to a state fund. Workers' comp differs from group health insurance because there is no employee payroll deduction for this coverage.

Federal government employees have workers’ compensation benefits administered by a separate program. Similarly, these employees don’t have to pay for workers’ comp insurance premiums. Employees do not contribute to workers' compensation premiums.

However, some employee classifications may be required to pay. Independent contractors and subcontractors are responsible for insuring themselves through state-run workers’ comp programs or by self-insuring through private insurers. If you work as a sole proprietor or independent contractor, you'll need to look into securing and paying for your own workers' comp insurance.

What Are the Workers' Comp Benefits for Injured Employees?

Workers' comp can provide several benefits for injured or sick employees, as long as the cause of their injury or illness was due to job tasks or the work environment. The following four classifications of workers’ comp benefits may be offered to injured or sick workers:

Temporary Partial Disability (TPD)	Injuries that fall under this category typically reward workers who can maintain some capacity for employment. TPD compensates workers for the difference between their previous wages and their current reduced wages.
Temporary Total Disability (TTD)	Injuries designated as TTD, which prevent workers from performing any work duties, can award up to 2/3 of the worker's income while they recover. However, many states offer benefits up to a certain cap or time. After this period elapses, benefits may end until further medical examinations are performed to determine their current and expected disability status.
Permanent Partial Disability (PPD)	Injuries that are serious enough that an injured worker permanently loses the use of their body, are covered under permanent partial disability, or PPD. This designation is for workers who can only do a limited amount of work after their injury. Depending on the state where they're employed or reside, the maximum amount that they can expect to receive can vary depending on various factors, such as future employability, available vocational training, and more.
Permanent Total Disability (PTD)	If an injury is such that it prevents the worker from working at all in the future, they may be able to get 2/3 of their weekly earnings for the rest of their life.

State-Specific Workers' Comp Benefits

Each state has laws that require most employers to pay into a workers' compensation insurance system, which provides benefits to injured employees who make eligible claims for workers’ compensation benefits. In general, most injured employees can receive the following kinds of benefits from a workers’ compensation claim in most states:

Weekly compensation
Payment of medical bills
Permanent impairment benefits
Vocational rehabilitation and training
Death benefits

Workers' compensation settlements do not include payment for pain and suffering or negligence claims. While workers' compensation is required for all employers, the level and type of coverage required are different for each state. State requirements differ in the following areas:

Types of covered employees
Types of injuries covered
Acceptable forms of proof of injury/illness
Excluded injuries
Statutes of limitation regarding the time an employee can file a claim
Employer defenses against claims

To find out what benefits your state provides under workers' comp insurance and whether you have a valid claim, contact an independent insurance agent.

Alternatives to Workers’ Comp Insurance

There are a number of alternatives to workers’ comp insurance, depending on the nature of an individual’s work, how they’re classified by the state in which they work, and other laws. Independent contractors are responsible for their own insurance, so they can get private disability insurance that covers their occupation.

With limited exceptions, states like Texas don’t require participation in workers’ compensation programs, but strongly recommend other forms of similar insurance in accordance with state minimums, such as self-insuring through private insurers or through third-party services. To be sure of your compliance as an employer, consult your state’s workers’ compensation board for more information.

Penalties for Non-Compliance with Workers' Comp Requirements

Workers’ compensation insurance is offered by employers through state-run programs to protect injured employees, as well as to protect businesses from significant lawsuits that can result from workplace activities. Employers that don’t adequately cover their qualified employees are susceptible to lawsuits by employees. However, there are some circumstances in which an employee can still sue an employer for an on-the-job injury or illness, including if damages were on the part of the employer and/or if the injury was outside the scope of the worker's job assignment.

Further, most states impose mandatory guidelines for workers’ compensation insurance for qualified employees. Failure to follow these guidelines can result in significant fines and possible criminal charges. For example, Colorado charges non-compliant employers fines totaling $250 per day for a first violation, and $500 per day for subsequent violations. Workers’ comp fraud can also result in significant fines and charges, with employers that misclassify employees or underreport the number of eligible employees receiving stiff penalties.

Who Pays for My Health Insurance While on Workers' Comp?

If you're covered through your employer's group health insurance plan but sustain an injury that's covered by workers' comp, typically, your employer will continue to pay for a percentage of your health insurance premiums. If applicable, you'll still be required to pay whatever portion of the group health insurance premiums you were responsible for before the injury.

However, understand that different policies may have varying requirements, so make sure to discuss this possible scenario with your employer or HR department so you can financially prepare for potential work-related incidents.

An Independent Insurance Agent Can Help You Find the Right 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.

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