The Fascinating Foibles of Purchasing Workers Compensation for Small Business

Do I Have to Have Workers’ Comp Insurance?
Well, like death and taxes, workers’ comp insurance is usually “required.” This is refered to as "carrying" workers compensation coverage. Even if you employ only one person most states require employers to provide workers’ comp insurance. The regulations do vary from state to state. Right now, Texas is the  only state allowing voluntary participation and may be considering a change, even as we write. And, even in Texas, it’s strongly recommended employers cover their employees with WC insurance.
State Laws Differ
WC benefits, in general, are awarded on a “no fault” basis, meaning no one is blamed unless the injured worker was under the influence of drugs or alcohol when the injury occurred.

Employee work
status categories vary from state to state; some require part-timer employees to be covered and some don’t.  

Coverage varies
from state to state.  In some states, injured employees get lost wages in addition to coverage for medical expenses. 

If you are
the sole owner and proprietor of your business, you can choose whether or not you want workers comp coverage for yourself.
Senior executives are eligible if they fit the definition of an employee.   You must consult the Workers’ Compensation Commission in your state to determine how the rules apply to the states where you do business.
Nearly “everything” about workers’ comp insurance must follow state law in every state an employer does business. We encourage you to review “ State Laws and Regulations” before your begin.  (

What About My Insurance Premium?
Premiums are determined by the workers; compensation board of each state.   The base rates may vary but the process for determining premiums is the same. Every state assigns each job category a code tied to the risk level of the job. Job risk is determined by the frequency of on-the-job injuries and their severity. Severity is measured by medical and indemnity payments. Indemnity payments are paid directly to the injured employee for losses suffered.  Jobs with very high risk (coal mining) carry higher work comp premiums. Conversely, jobs with low risk (secretary) carry lower premiums.
Other factors considered when determining your workers’ comp insurance premium includes the total number of people covered; how these individuals breakdown: owners, full-time/part-time workers, subcontractors, consultants, job functions, type of coverage (full, one time, seasonal event), years in business, gross payroll.

How Do I Buy Workers’ Comp Insurance?
Workers’ comp insurance is purchased through an agency or company licensed to write policies.   If you are unable to obtain workers’ compensation insurance privately, your state is required to provide coverage. Your state’s workers’ comp commission can help you determine how to apply for coverage. 
Self insurance is an option for companies with a hefty net worth. Each state, with a different net work requirement, must approve your application. Until recently,  self-insurance   an option for big companies. However,  smaller companies with similar attributes, are banding together to acquire group self insurance. Group self insurance also needs state approval, but is a great option for smaller companies wanting and needing big company benefits.
Don’t be surprised, but worker’ comp insurance is a cost of doing business employers must pay out of their own pockets. Premium costs may not be passed to the employee, like health insurance. Neither may you deduct the cost from employee wages. Payments are made through the claims administrator not directly from the employer to the treating physician. 

Must I Tell My Employees About My Work Comp Policy?
Oh yes! An employer is required to post a notice to employees.” Failure to do so results in a fine.  Signs contain information on your workers’ comp program. You get your signs from your insurer and you must post them conspicuously in hallways or cafeterias and any other places where everyone can see them during the work day. 

In states allowing
the employer to choose the treating physician, the signs tell employees where to go for medical treatment. 

In states where
employees choose treating physicians, you post signage outlining the procedure for handling the workability form. Post workability cycle procedures in the same place the workers’ compensation signs are posted. 
Combine all information together with your post injury response requirements signs, so when a work-related injury occurs, all employees will not only know they have coverage, but also know their post-injury rights and responsibilities. Employee signs include notice of posting, workability form process procedures, and post injury response procedures. 

What Do I Do When an Injury Occurs?
The onset of the claim, is the time when your workers’ comp management practices kick in – at once.  Get claim forms from your insurer or (if self-insured) your third party administrator including:
workability form cycle, witness report form, supervisor and employee statements, first day phone call and
flowers/cards, and development of modified duty job description. (workersxzcompxzkit)
Keep in mind when an employee is out for more than four days, weekly open ended conversations, and additional workability forms accompanying the injured employee each time the person visits to the doctor, must be documented and filed. The goal s to get the employee back to work as soon as medically possible, even in a restricted or modified duty capacity.


Author Robert Elliott, executive vice president, Amaxx Risks Solutions, Inc. has worked successfully for 20 years with many industries to reduce Workers' Compensation costs, including airlines, health care, manufacturing, printing/publishing, pharmaceuticals, retail, hospitality and manufacturing. He can be contacted at: or 860-553-6604.

Podcast/Webcast: Claim Handling Strategies
Click Here:  Claim_Handling_Strategies/index.php 

Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers' comp issues.
©2010 Amaxx Risk Solutions, Inc. All rights reserved under International Copyright Law. If you would like permission to reprint this material, contact Info@

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