Understanding Workers Compensation Insurance

Workers Compensation Insurance

What Is Workers’ Compensation Insurance?

Workers’ compensation insurance also known as workers comp covers the medical costs and lost wages for its employees’ work-related injuries and illnesses. If you own a business in California that has employees, you are required to provide workers’ compensation benefits. The coverage is afforded regardless of fault, meaning the injured worker is generally eligible for benefits even if his or her negligence contributed to the injury. When your employees have workers’ compensation benefits, they waive their rights to sue you.

Workers’ compensation insurance restrictions

Workers’ compensation insurance covers the expenses that come with an employee’s work-related injury or illness. However, there are some restrictions. An employee cannot receive benefits if the illness or injury is on the influence of alcohol at the time of the injury. Furthermore, compensation may also be denied if the injuries were self-inflicted, not job-related, or received while committing a crime or violating company policy. Workers’ compensation insurance doesn’t cover certain types of workers and jobs. Here are some categories of employees that are not eligible for California Workers Compensation Insurance:

  • Part-time domestic workers
  • Independent contractors
  • Volunteers
  • Employees of private homes
  • Farmers and farmhands
  • Maritime employees
  • Federal Employees
  • Railroad employees
  • Casual or seasonal workers

Coverages

As an employer, you are responsible for your employees’ workplace safety and security, but accidents happen. That is why workers’ compensation insurance policy is very essential. California workers compensation policy provides the following types of benefits:

Medical Coverage

Workers’ comp insurance provides coverage to help your employees pay for medical expenses as long as an employee’s injuries or illness is related to their job. It includes fees charged for doctor visits, the hospital pays, doctor appointments, necessary surgeries, and prescriptions. Medical coverage are usually unlimited, payments are made to the point that the injured employee has fully recovered from the injury.

Disability

It provides a partial replacement of income lost if an injury keeps an employee out of work due to an on-the-job injury. California workers’ comp system offers types of disability benefits that may be available to you after a workplace accident.

  • Temporary total disability – benefits are paid during the period of time the employee is completely unable to work on a temporary basis due to the injury.
  • Temporary partial disability – Covers an injured employee if they return to work but unable to earn them as much as they were earning prior to their injury.
  • Permanent total disability – Covers an injured worker who permanently and totally lost their ability to work and earn after an injury.
  • Permanent partial disability – Provides benefits to an employee that has permanent impairment because of work injury which makes him/her unable to perform at his/her full capacity.

Rehabilitation

Benefits pay for medical and therapeutic care necessary to help injured employees rebuilding work skills as part of recovering from an injury or illness. This includes the cost of any training and a maintenance allowance while participating in rehabilitation.

Death

When a work-related injury or illness results in the death of an employee, workers’ compensation insurance will help pay the funeral and burial expenses plus financial support to eligible dependents.

How Much Does Workers’ Compensation Insurance Cost?

The cost of workers ‘compensation insurance is determined by the Workers’ Compensation Rating Bureau of California. Workers’ compensation insurance rates depend largely on a handful of factors such as work classification, payroll, number of employees, and the company’s experience. Lower-risk occupations have lower premiums than high-risk occupations. Also, businesses with a favorable experience modifier such as no loss history will be rewarded with lower premiums.

In California, for example, roofers have higher occupational risk classification than office clerks. Roofers pay higher premiums because the occupational hazards of roofers are higher than those of an office clerk.

Do I Need Workers’ Compensation Insurance in California?

Yes! If you’ve recently started your own business or just hired your first employee, California requires you to provide a minimum level of workers’ compensation insurance coverage. Having an employee naturally increases the likelihood of accidents and injuries, which increases your liability risk.

As a business owner, you must provide your employees with workers’ compensation benefits, regardless of the size of the business or number of employees. Remember, workers’ compensation insurance must be bought as a separate policy and should be purchased from a licensed insurance company like NEWS Insurance. After all, making sure that your company and your employees are protected in case an accident occurs on the job is a prudent decision.

Does a Sole Proprietor Need Workers Compensation?

Legally, if you’re a sole proprietor and you don’t have anyone else working for you, workers’ compensation insurance is optional. However, it may be beneficial to do so, not just in California but in all of the United States. Sole proprietors like an independent contractor face the chance of injury that can result in medical expenses and loss of income. In addition, clients may require you to have your own workers’ comp coverage even if you’re a sole employee as a precaution.

A sole proprietor or general contractor who occasionally hires help need workers’ comp insurance policy as well. Here’s an example of when you would need workers’ comp. You’re an HVAC contractor working on your own, but when you land a big job, but your nephew, who’s training to be an HVAC contractor, works with you. If he gets hurt while doing a job, you might have to pay his medical costs. Having a workers’ compensation policy will cover his medical expenses.

Penalties for not having California workers’ compensation?

First and foremost ignorance of the law excuses no one. This means employers will not be vindicated by simply claiming they were not aware of the law regarding workers comp. Operating without worker’s compensation insurance coverage in California is a criminal offense. The penalties assessed by the Division of Labor Standards Enforcement could be:

  • Stop order that prohibits your company from using employee labor until you obtain coverage. Failure to observe the stop order is punishable imprisonment in the county jail for up to sixty days and a fine of up to $10,000 or both.
  • Twice the amount the employer would have paid in workers’ compensation premiums during the time of uninsurance, or $2,000 per employee who is on the payroll at the time employer was uninsured.

Additionally, if an injured worker files a workers’ compensation claim goes before the Workers’ Compensation Appeals Board and a judge finds that the employer did not secure insurance, when the dispute is resolved the uninsured employer may be assessed a penalty of $10,000 per employee on the payroll at the time of injury up to a maximum of $100,000.

Worse, if an employee becomes ill or injured while on the job and the employer does not have workers comp insurance, the employer is responsible for paying all bills and expenses related to the illness or injury.

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