Workers’ Compensation Insurance

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What is Workers’ Compensation Insurance?

Workers’ Compensation Insurance is a form of business insurance aimed to protect employees from work-related illnesses and injuries.

Workers’ compensation insurance is also known as worker's comp in North America, or even WC, Workers’ Liability Insurance and Compo in Australia.

It is a policy which covers employers and employees injured as a consequence of a misfortune on the job, decreasing their employability. Some of the benefits included in this policy are: medical expenses, death benefits, lost wages, and vocational rehabilitation. Typically in exchange for (mandatory) relinquishment of the employee's right to sue his or her employer for the tort of negligence.

An employee that gets injured or ill during his working time or for any cause that may be related to his job is allowed to obtain a wage replacement and/or coverage of medical expenses and other benefits depending on what is included in the contract.

When a worker dies in a job accident, his family may obtain benefits such a defined amount of money, a form of pension or indemnity for the spouse and sons, the replacement of the job position by a member of the family and so on, depending on the conditions negotiated in the policy.

Compensation and medical benefits are also planned for workers who contracts a disease as a result of performing a job, especially for those whose jobs are considered dangerous for human health.

History of workers’ compensation insurance

The origins of workers’ compensation insurance can be traced in Europe during the Industrial Revolution. Before the institution of workers' compensation, employees who were injured on the job could only be reimbursed through legal action. Over time the number of lawsuits increased, causing the introduction of laws to protect workers’ rights. The US introduced workers’ compensation policies a few decades after Europe.

Cost of Workers’ Compensation Insurance. Premium

Premiums of this type of policy are determined by different factors:

• Risk classification of the business
• Risk of the work environment
• Risk of the jobs
• Number and type of employees’ claims
• Employee wage
• Etc.

In the same business, employees can pay a different premium. For businesses that are not risky, self-insuring could be a way businesses can reduce their workers compensation insurance rates.

Workers compensation insurance is sometimes mandatory as by national law and in many countries it is managed directly by public government or institutions associated to public bodies.

Workers’ Compensation Insurance Coverage

• Plans insurance differ between jurisdictions.
• This type of insurance does normally not cover workers in case of employer negligence.
• Workers’ compensation systems vary also depending on if it is purchased from a private insurance company or from the state government.
• Not every business is required to purchase workers' compensation insurance. A general rule is that if businesses have employees who are not owners of the company, they probably need workers' compensation insurance.

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