If you’re a first-time business owner, you’re likely a bit overwhelmed by all the rules and regulations you have to comply with before even opening your doors. Insuring your business, in particular, requires a lot of time and research—and you’ll have to purchase insurance for everything from product liability to professional liability insurance.
When the time to start hiring comes around, you’ll have to purchase worker’s compensation insurance, which most U.S. states legally require for businesses of all sizes. Should an employee suffer a work-related injury or illness, workers’ comp covers the cost of medical treatment and pays the injured employee a portion of their lost wages.
Before starting your search for the rights workers’ comp insurance plan for your business, you may want to refresh yourself on workers’ comp terminology.
- Rate– The dollar amount that it costs to cover the policyholder’s losses and expenses, including profit for the insurance provider for one unit of exposure.
- Premium– The total amount an insurance provider charges the policyholder for coverage.
- Claim– When an insurance policyholder makes a formal request to the insurance company to provide compensation for a loss covered by the policy.
- Compensation– The monetary payment from the insurance provider to the policyholder or other covered individual when the provider approves a claim.
- Settlement– A financial agreement reached by the parties involved if the affected individual rejects the compensation package offered by the insurance provider.
- Industry Classification Codes– Industry classification codes are four-digit codes representing the level of risk associated with a specific industry. Insurance providers use this code to determine premiums.
- Claims Administrator– The individual who processes the claims made by the insurance policyholder.
- State Fund– State-specific organizations that offer workers’ comp insurance to businesses within the state. They are independent entities in some states and run by the state in others.
- Competitive State Fund– An optional state fund from which businesses can purchase workers’ comp. In states with competitive funds, employers can choose to purchase coverage from a private insurance company.
- Monopolistic State Fund– A state fund from which all businesses operating within the state must purchase insurance. North Dakota, Ohio, Washington, Wyoming, Puerto Rico, and the U.S. Virgin Islands all have monopolistic state funds.
- Private Insurer– An insurance company that works outside the purview of state and sells insurance policies.
Injuries and Illnesses
- Workers’ Comp Injury– An injury for which an employee can file a claim for workers’ comp benefits. This includes any injury sustained while performing work-mandated duties.
- Workers’ Comp Illness– An illness, usually developed over time, caused by working conditions or the environment.
- Repetitive Stress Injury/Cumulative Trauma Injury– Injuries, often damage to muscles, tendons, and nerves, caused by repetitive motions required to complete work duties.
- Workers’ Comp Medical Care– The medical care an employee is entitled to after falling ill or being injured onsite or while performing work-related tasks.
- Disability Evaluation Unit (DEU)– The DEU is a group of individuals who assess the disability of an employee based on their medical records.
- Agreed Medical Evaluation (AME)– The results of a medical evaluation done by a third-party on behalf of the injured employee and the insurance provider.
- Primary Treating Physician– The physician responsible for the treatment of the employee that makes a worker’s comp claim.
- Qualified Medical Examiner– A authorized medical professional responsible for the health evaluation of the claimant of a workers’ comp claim.
- Temporary Disability Benefits– Workers’ comp benefits received by an injured worker for a limited period.
- Permanent Disability Benefits– Benefits received by a worker due to a permanent disability covered by the workers’ comp policy.
- Vocational Rehabilitation Services– Services that help disabled workers transition from one role to another after a workers’ comp injury.
- Death Benefits– Benefits for the beneficiary of an employee killed by a work-related accident. Typically, the payments go toward funeral expenses.
Do The Research and Make a Decision
After reviewing workers’ compensation terminology, it’s time to assess your business’ specific needs, research your options, request quotes, and finally, make a policy purchase decision. Take the time to understand your state’s insurance laws, ensuring you comply with all workers’ comp regulations and understand your options.