Workers’ compensation insurance is an important investment for small business owners. It provides cash benefits and medical care for workers who are injured as a direct result of their job. On the flip side, it protects your business from having to pay out of pocket.

More specifically, workers’ compensation laws give employees the right to collect for a compensable injury, disability, or death that occurs while being employed. It’s common for workers’ comp laws to be referred to as no-fault laws, or no-fault insurance.

The no-fault workers’ compensation system is based on the principle that injured employees are entitled to receive compensation for their injuries without proving fault against the opposite party.

The amount that an employee receives from making a claim is not impacted by any potential carelessness or negligence on their part. However, a worker loses the right to compensation if the injury is a direct result of being under the influence of drugs or alcohol, or of an attempt to injure themselves or others while on the job.

Benefits provided in no-fault workers’ compensation insurance are also called the exclusive remedy. They are the only benefits available to employees. Workers cannot sue employers in court for additional benefits.

Who pays for no-fault workers’ compensation insurance?

A business pays for no-fault workers’ compensation insurance. Employees do not cover no-fault compensation costs. You can make up for the cost of the insurance by incorporating the expense into the prices your business charges for its products or services.

Almost all employers have to buy workers’ comp insurance. However, workers’ comp doesn’t cover everyone on the job. Agricultural workers, domestic workers, and independent contractors are among those who are sometimes excluded.

How much does no-fault workers’ compensation cost?

If you’re a small business owner shopping around for workers’ comp insurance options, the most important question at the top of your mind is probably, “how much does workers’ comp cost?”

Riskier jobs carry higher premiums. That’s why, as a worker, your compensation class code is an important part of the formula that insurers use to estimate how much your compensation insurance will cost.

Workers’ compensation codes are three or four-digit codes that insurance companies use to estimate rates based on the risk level of work that employees are performing. Also known as class codes, these are maintained by the National Council on Compensation Insurance (NCCI) – an independent organization that gathers and analyzes data on workers’ compensation insurance.

There are four main factors for small business owners to consider when determining the cost of no-fault workers’ compensation insurance:

Location: The state is the employee working in
Type of work: This is otherwise known as the workers’ compensation code (or class code)
Payroll: The size of your company’s overall workforce
Claims history: The number of previous claims made by employees (also called an experience modification factor)

Each of the above factors will help determine your workers’ compensation insurance rate, which can range anywhere from $0.57 in Texas to $2.32 in Alaska per $100 of covered payroll. Learn more about how each factor impacts your workers’ comp costs.

How are workers’ comp claims paid?

A workers’ no-fault compensation claim is paid if the injury is compensable, meaning the employer and insurance carrier agree that the injury is work-related and covered by the policy. If the insurance carrier disputes the claim, no cash benefits will be paid until the state workers’ compensation board, mediator, or judge determines who is right.

If a worker is not receiving benefits because an employer or insurance carrier is in the process of disputing an injury, the worker may be eligible for disability benefits in the meantime. Any payments made under the disability program, however, will be subtracted from future workers’ compensation payments.

Employers who carry no-fault workers’ compensation coverage for their employees are protected from liability and from having to pay out directly to cover employee injuries. However, employers with coverage still face direct and indirect costs associated with workplace injuries. Sometimes, claims can significantly impact the employer, with costs leading to an increase in premiums, additional wages owed, and loss in productivity.

When should I file a workers’ no-fault compensation claim?

As an employer, you should notify your insurer immediately after you’ve become aware of the work-related injury. You typically have 24 hours after being informed by your employee about the injury to give them a claim form and notification of their workers’ comp rights.

As for filing the workers’ compensation claim form, employees may have varying time limits to submit the claim (often ranging from 1 to 3 years). However, as an employer, you should pass the employee’s claim form along to your insurance provider as soon as possible.

What is a Workers’ Compensation Board?

Weekly cash benefits and medical care are paid by the employer’s insurance carrier, as directed by the state workers’ compensation board and no-fault state employment. This board is a state agency that processes the claims. It determines whether the insurer will reimburse the employee for cash benefits, medical care, or both, and the amounts payable.

Employers who do not have the required no-fault workers’ compensation insurance for their employees can face exorbitant costs if an employee is injured. In fact, in most states, it is against the law to have a small business that is uninsured by workers’ comp.

To find out more about the specific no-fault compensation laws in your state, visit your state’s workers’ compensation website or contact the state’s workers’ compensation board.

What if the employee is still able to work after being injured?

If the employee can return to work but cannot earn the same wage as a result of injury, the employee may be entitled to a benefit that will make up two-thirds of the difference. The employee also may return to work in light or alternate duty while healing.

Workers’ compensation insurance made easy

If figuring out workers’ no-fault compensation insurance seems overwhelming, you’re not alone. Pie Insurance can help. We’ve taken the guesswork out of the process and we’re passionate about providing workers’ comp insurance for small businesses across the country.

Thanks for reading! Please note that this content is intended for educational purposes only. As laws change regularly, you should refer to your state legislation and/or an advisor for specific legal counsel. If you’re a small business owner, learn more about workers’ compensation insurance or check your current rate in 3 minutes.

Why are workers' comp laws called no-fault laws? | Pie Insurance