What is workers’ compensation?

Definition of Workers Compensation

Workers ' Compensation Audit insurance provides medical and wage benefits for those injured or ill at work. Each state requires coverage and the wage and medical benefits vary by state. Workers ' compensation is considered to be social insurance because it is based on a social contract between management and workers, in which business owners are protected from civil suits by their workers who get injured on the job in exchange for purchasing workers ' compensation insurance. There are still limitations on each party's benefits. Workers ' compensation insurance is purchased by companies and underwritten by insurance companies and underwritten by a publicly supported state in some states funds.

Workers ' compensation provides employees who are injured or become ill "in the course and scope" of their job with medical expenses, lost wages, and rehabilitation costs. It also pays death benefits to employee families killed in the workplace.

Similar undertakings in each state that exhibit comparable patterns and costs of workplace injury are grouped into "classes." Tariffs are determined for each class based on the previous five years of loss costs for all undertakings in that class. This provides a fair system where rates are charged in proportion to the business class ' actual loss experience. Economic factors are then overlaid on this data for each state to determine the rate in a given state for each class.

A system called an "experience rating" allows class rates to be modified based on an individual business ' loss history. This system provides business owners with substantial control over the costs of the compensation premium for their workers–secure businesses are rewarded with lower premiums and unsafe businesses are penalized with higher premiums.

All states, with a small number of exceptions, require companies with non-owners employees to purchase compensation cover for those employees.

Businesses that fail to provide workers ' compensation coverage may face severe and costly repercussions including out-of-pocket payment of claims, fines, and possible imprisonment, and possibly lose the right to conduct business in the state.

For more information about Workers’ Compensation Audit and Workers Compensation Consultants, including workplace safety training contact your local agent or call J&L Risk Management Consultants at 1-800-813-1386.