Workers’ compensation insurance is a type of insurance that provides benefits to employees who are injured as a result of their job duties.
This type of insurance is typically required by law in most jurisdictions, but it can be purchased from a workers’ compensation insurance company or through a business insurance policy.
The purpose of workers’ compensation insurance is to provide financial support to employees who are unable to work because of injuries sustained at their jobs. Benefits can include medical expenses, income replacement, and death benefits.
Most states have specific laws that require employers to provide workers’ compensation insurance for their employees, though these laws vary by state.
What Can It Cover?
Workers’ compensation insurance may cover medical expenses, income replacement, death benefits, and other costs associated with a job-related injury or illness.
Medical expenses can include doctor’s visits, hospital stays, surgery, and rehabilitation.
Income replacement benefits can help to replace a portion of an employee’s lost wages while they are unable to work.
Death benefits can provide financial support to an employee’s family in the event of a job-related death. Some policies may also cover legal expenses if an employee needs to file a workers’ compensation claim.
What Does It Not Cover?
Workers’ compensation insurance typically does not cover injuries that occur outside of the workplace or that are not job-related.
Injuries that occur while an employee is off of work, such as during vacation or sick leave, are typically not covered.
There are numerous exclusions to workers’ compensation coverage, so it is important to read the policy carefully or speak with an insurance agent directly to determine what is and is not covered.
If an employee is injured while working in a dangerous job, such as construction, they may be covered by workers’ compensation insurance, but they may also be eligible for additional benefits through a hazardous occupation policy. This is a different type of insurance that covers injuries that are more likely to occur in certain occupations.
Are There Policy Limits?
Most workers’ compensation insurance policies have limits on the amount of coverage they provide.
These limits can vary depending on the type of business, the number of employees, and the state in which the business is located.
Some policies may have a limit on the number of medical expenses that can be covered, while others may have a limit on the income replacement benefits that are available.
It is important to understand the limits of a policy before purchasing it, which is why working with an insurance agent can be beneficial.
Is an Employer Required to Report Every Work-related Injury?
It depends on the state. In South Carolina, changes in the law allow an employer to refrain from reporting a work-related accident if the medical bills are $500 or less and if the employee hasn’t lost time from work.
Workers Compensation in South Carolina
South Carolina’s Workers Compensation law was written in the 1930s and based on North Carolina law. The law allowed workers to make a claim for medical benefits and lost income, while giving up the right to sue the employer.
This kept both employer and employee out of the court systems and was beneficial to both.
South Carolina’s Workers Compensation Pool
The South Carolina Assigned Risk Pool is now handled by the State Department of Insurance. Two insurance companies provide coverage for employers in the SC Pool. These companies are Capitol City Insurance and Companion Property & Casualty. You may be in the Pool for several reasons:
- You are a new start up business, and the standard markets don’t want to cover you without two or three years of business experience and prior workers compensation coverage.
- You are in a business that is particularly hazardous, and most carriers do not want the exposure. Examples are roofer, rough carpentry, siding installation, asbestos abatement contractor, etc.
- Your agent does not represent any standard market companies that normally write workers compensation coverage in South Carolina. Many captive agents and/or direct writers don’t write workers compensation coverage, and the only market they have is the pool.
- You had some losses requiring you to go into the pool.
- After a couple of years in the pool, your agent has not bothered to shop the current market.
Advantages of the Pool:
- Coverage when you can’t obtain other coverage.
Disadvantages of the Pool:
- Rates for each classification such as salesman, clerical, etc, are generally higher than the standard market. The bottom line is workers compensation cost you more.
- If you have an experience modification above 1.00, the pool has an additional surcharge called an ARAP which applies additional premium. For example, if your experience modification is 1.27, you could have a 1.12 ARAP, which adds an additional 12% to your premium. Some standard companies will write an employer with a 1.27 experience modification if your agent can adequately explain the circumstances, is licensed with that company, and remembers to shop your coverage for a better price.
- The expense constant is higher in the pool than in the standard market. In fact, a few companies didn’t file an expense constant, so that saves you almost $200 if your agent represents that company.
- Some standard market companies still give up to 25% credit to good workers compensation accounts. There are no credits in the pool.
Experience Modification Factor
If your workers compensation premium is over $4,500 for 2 years or over $8,000 for one year, the National Council on Workers Compensation Insurance (NCCI) can formulate an experience modification.
This can be a two edged sword. If you have good experience, you could have a credit modification factor and get a credit taken off your annual premium. But if you have a number of claims or a big claim, you could end up with a debit modification that would be added to your premium. You can see how important it is to keep not only the cost of claims down, but also the number of claims you have.
Monoline Workers Comp
Workers compensation losses have been down in South Carolina over the past few years, so a number of insurance carriers began to provide workers compensation coverage in South Carolina again. In 2000, Workers Compensation experience began to change and the insurance market began to “harden” as opposed to the “soft” market of the previous few years when companies were willing to write workers compensation and give additional scheduled credits to get the business.
How Rates Are Determined
The State of South Carolina has a base rate with which all insurance companies begin. Each year, every company reports their experience factor or “lost-cost” factor to the State.
This factor is multiplied by the base rate to get that company’s cost for each rate classification (ex. salesperson, clerical, etc). Most companies that write workers compensation in the State also have an “ expense constant” added to the bottom-line. However, some companies did not file an “expense constant.”
Getting a Workers Compensation Policy
At Kenneth Rhodes & Associates we work with you to get all of the correct commercial insurance policies your business needs.
Contact your local office today to speak with an agent who can customize coverage to you.