The Importance of Proper Worker’s Compensation Insurance

Regardless of the work environment, every company is susceptible to some sort of accident that can result in a worker’s compensation insurance claim.  When an employee is hurt at work, depending on the type of injury, the results could be a heavy financial burden if the employer is not properly covered.

Worker’s compensation insurance covers the employer on a variety of different levels, including wage replacement and medical expenses to employees when injured in the course of their work. Worker’s compensation insurance also helps protect employees from the potentially devastating costs of work-related accidents. It can also help protect the business owner from the expensive costs of employee claims.

A simple injury has direct costs to the employer, like the medical expenses incurred by the employee.  They also have to face indirect costs as a result of the injury that can exceed the medical expenses, including:  Any wages paid to the injured employee for absences not covered by workers’ compensation, wage costs related to time lost through work stoppage associated with the worker’s injury, time spent by others within the company who have to handle the claim, cost of hiring and training a replacement worker if the injury is served enough, lost productivity related to work rescheduling, new employee learning curves, cost to clean up, and repair and replace equipment if damaged in the accident.

According to a study by the Stanford University Department of Civil Engineering, these indirect costs often exceed the direct costs.  For example, a fracture on average generates direct costs of $50,000.  The indirect costs, however, are estimated at $55,000.

Worker’s Compensation insurance is just as important for the employer as it is for the injured employee.  Without proper coverage, the employer could be open to a civil lawsuit from the injured employee for even more money.

If a business operates as a sole proprietor and the owner decides not to take out a worker’s compensation policy on himself/herself, they could still be open to worker’s compensation claims.  If the sole proprietor hires a contractor for renovations within their office and this contractor does not have worker’s compensation insurance for himself, then he can file a lawsuit against the sole proprietor if he is injured within the office.

It is situations like these that illustrate the importance of being properly covered with detailed worker’s compensation policy.  If your business needs to review their worker’s compensation coverage to make sure that there are no loose ends, then contact Risk Managers for more details.