Workers Compensation

Workers’ compensation insurance, commonly known as “workers’ comp,” is a government-mandated program that provides benefits to workers who become injured or ill on the job or as a direct result of their work

OVERVIEW

SCOPE of COVERAGE

Workers’ compensation insurance, commonly known as “workers’ comp,” is a government-mandated program that provides benefits to workers who become injured or ill on the job or as a direct result of their work. Here’s how it works:

  1. Coverage: Employers purchase workers’ compensation insurance to protect their employees. If an employee is injured or disabled due to work-related reasons, this insurance provides financial support.
  2. Benefits:
    • Wage Replacement: Workers receive partial wage replacement during the period they cannot work.
    • Medical Costs: The insurance covers healthcare expenses related to the injury or illness.
  3. Waiving the Right to Sue: By accepting workers’ compensation benefits, the employee waives the right to sue their employer for damages related to the incident.
  4. State-Specific: Each state in the United States manages its own workers’ compensation program, with varying requirements and benefits.

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Workers’ compensation insurance provides essential coverage for employees who suffer work-related injuries or illnesses. However, there are specific exclusions to be aware of:

  1. Self-Inflicted Injuries or Illegal Activities:
    • Injuries resulting from self-harm or illegal activities are typically excluded.
  2. Breaks and Lunchtime Injuries:
    • Injuries during breaks or lunchtime (unless considered part of work duties) may not be covered.
  3. Commute-Related Injuries:
    • Injuries while commuting to and from work are generally excluded.

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Workers’ compensation insurance premiums are calculated based on several factors, ensuring that your coverage aligns with your specific needs. Here’s how it’s typically done:

  1. Classification Code Rate: This rate is determined by the National Council on Compensation Insurance (NCCI) or your state’s rating bureau. It’s based on the type of work your employees do.
  2. Experience Modification Number (MOD): Calculated by the NCCI, this number reflects your claims history compared to similar businesses.
  3. Payroll: Divide your annual employee payroll by 100.
  4. Premium Formula:
    • Premium=Classification Code Rate×(100Annual Payroll​)×MOD

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