What Is Workers’ Compensation Insurance?
Hi, this is Jerry at Barbary Insurance Brokerage. I’m here to talk to you about what worker’s compensation insurance is. Worker’s compensation is actually a liability line of coverage. You know a lot of people think of it as a benefit but in reality before there was worker’s compensation everything was very different. If an employee was injured, their only recourse was to sue their employer. It was very expensive and also the employer’s first defense was that the employee had contributed to the injury and therefore was responsible for it himself so employees often lost in court. On the flip side when employers lost themselves the damages could be incredible and they couldn’t budget for it. So it was bad for employees, it was bad for employers, so about 100 years ago, the concept of worker’s compensation came into being and it’s been adopted by most of the states in the country. It’s a no fault coverage where the actual benefits are determined by the state and the benefits fall into three major categories. There’s 100 percent medical subject to limitations set by the state for work related illness and injury. Secondly there’s a disability component that’s divided into both a temporary and a permanent disability. Temporary disability is there for while you can’t work while you’re recovering and permanent disability is there for if you’re seriously injured and perhaps you’ll never be quite the same again, it will give a cash settlement for that. And then finally there’s a small amount of life insurance attached to worker’s compensation coverage in the event that you are killed as part of your job. In addition to those three lines of coverage there’s a fourth line that’s called employer’s liability. If as an employer you’ve done something egregious that contributed to the injury and you are sued, then the employer’s liability is there to defend you. It can also be there to defend something called an action over claim and that happens a lot with contractors so for instance an employee of a subcontractor may be injured on the job site of the general contractor and they may feel that the general contractor contributed to that injury and sue the general contractor. The employer’s liability for the general contractor will respond to that claim. So that’s worker’s compensation coverage in a nutshell.