Small business owners who have employees are required by state law in many states to maintain workers compensation coverage. In some states, an employer who has no Employers Liability Insurance can be shut down by health and safety officials. Workers compensation coverage is provided in exchange for a mandatory relinquishment of an employee’s right to sue her employer for a tort of negligence. Medical care, death benefits, temporary or permanent disability benefits, and vocational rehabilitation services encompass the covered areas of workers’ compensation benefits.
There are two main types of workers compensation coverage, and both are needed in a complete employment liability protection package. They are Workers Compensation Insurance and Employers Liability Insurance.
Workers Compensation Insurance. As its name implies, this type of insurance provides compensation to employees who may have suffered an injury associated with work or an occupational-related illness. Keep in mind that the employer is liable for injuries or illnesses suffered by an employee if developed during work, according to most state worker’s compensation laws. By having this type of insurance, offered as Part One, employees receive monetary payments for their medical cost and also for some portion of their lost wages from the insurance company — with the intent of avoiding litigation claims. State laws vary, and some states may limit the amount of recovery injured employees receive, which helps to protect employers.
Employers Liability Insurance. Another integral part of Workers Compensation coverage is Employers Liability Insurance, which provides protection against litigation suits (filed by the employee, employee’s direct family members or relatives, or third parties) due to injuries or illnesses associated with employment. Typically offered under Part Two of a workers compensation policy, Employers Liability Insurance provides additional coverage.
Some Workers Compensation coverage policies have provisions to cover injured employees in other states besides the state in which the business operates. For businesses that require employees to travel to other states, these provisions are an important consideration for the small business owner who sends his labor force out in the field in another state.
Although standard workers compensation insurance benefits are set up by each state, a small business owner can select the amount of Employers Liability coverage that suits his company’s needs.
