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Workers' Compensation Insurance

Why You Need Workers' Compensation Insurance
As soon as you hire your first employee, you need the protection of workers' compensation insurance. Not only do many state laws require it, but also the financial security of your business depends on it.

What Workers' Compensation Insurance Is
In general, workers' compensation represents a compromise between employers and employees regarding employment-related injuries or illnesses. In short, employees relinquish their right to sue employers if they suffer some job-related injury or illness. But in return, employers agree to provide state-mandated benefits if employees suffer some job-related injury or illness. And to ensure employees have the money to pay these mandated benefits, most states require that employers demonstrate that they have the financial ability to pay any claims that may arise. Typically this financial ability is demonstrated through the purchase of Workers' Compensation insurance. Laws regarding workers' compensation insurance vary by state, so check with your independent insurance agent or broker to find out exactly what you need and how it's purchased.

How Workers' Compensation Insurance Works
Most workers' compensation insurance policies actually provide two types of coverages:
• Workers' Compensation Coverage. This type of insurance provides benefits for injured workers as required by state law regardless of who is at fault for the injury or illness. In other words, whatever benefits your state requires, your Workers' Compensation policy would provide.
• Employers' Liability Coverage. This additional coverage protects employers in case they are ever sued for damages arising from employment-related accidents or diseases. However, to collect benefits provided by employer's liability coverage, both the employee as well as anyone else not covered by workers' compensation laws (i.e., spouses and dependents) would have to prove that the employer was actually legally responsible for the employee's injury or disease.