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Workers’ compensation is a form of insurance providing wage replacement and medical benefits to employees injured in the course of employment in exchange for mandatory relinquishment of the employee’s right to sue his or her employer for the tort of negligence.
Nearly all occupational injuries are covered by workers’ compensation, as long as they are determined to be unintentional. The whole definition, however, is rather broad, defining what is covered as “injuries experienced throughout the course and scope of employment.”
It’s possible that there are some ambiguities in what that means. If you slip and fall in the parking lot on your way to work, for example, you may be able to file a workers’ compensation claim, but some states have tougher rules than others.
There are a handful of reasons why having workers’ comp is important for a business owner, but these two are the most important.
As a result, a workers’ compensation policy ensures that employees are appropriately compensated for injuries caused on the workplace. Employers, on the other hand, can provide financial assistance to injured employees, enjoy a set cost, and avoid occupational injury litigation.
It’s important to note, however, that employees can still sue employers for other types of workplace events, including harassment, bullying, discrimination, etc.
If a business chooses not to carry workers’ comp, it could face a number of consequences, such as the following.
Workers’ comp costs vary widely, with three main factors affecting your premium.
As you may expect, a major roofing contracting firm will pay far more in workers’ compensation than a large accounting firm. A single hair stylist’s annual premiums could be a few hundred dollars, while a large factory could spend hundreds of thousands of dollars.
Your workers’ compensation claims history, also known as an experience modifier, or just a’mod’ for short, is another element that influences your premium. The experience mod of a company is a method that assesses if a company has had more or fewer workers’ compensation claims than other companies in its industry.
The industry average is 1.00, with a number less than 1.00 indicating fewer claims and a lower rate than the norm. Higher than average claims and a higher rate are indicated by numbers greater than 1.00.