Workmans Compensation Insurance Policies


Although the standard workers compensation policy provides only two basic types of coverage, the policy is divided into three coverage parts. Part One, Workers Compensation Insurance, provides coverage for statutory benefits payable under the laws of the covered states specified in the policy. Part Two, Employers Liability, provides coverage for the employer for liability claims by employees or their dependents that fall outside the protection of the workers compensation law. Part Three, Other States Insurance, provides coverage for liabilities payable under the workers compensation statutes of specified additional states.

Will Workmans Compensation Coverage Cover Employees While Out of State?

Coverage typically is provided for all states in which a business actually performs operations under Part One of the policy, but a business may have incidental exposures in other states, such as when an employee is injured while traveling to a seminar in another state. 

Other states coverage is designed to pick up these incidental liabilities, but only for the states specified on the policy’s Information Page. (The “Information Page” is the declaration page on which the named insured, its address, and certain other data is scheduled.)

Why Do I Need Workmans Compensation Insurance?

Even though all 50 states and the District of Columbia now have workers compensation laws, and each law has the same basic objective of providing no-fault benefits to workers injured on the job, no two state workers compensation laws are identical. In fact, the specific provisions of workers compensation laws often vary considerably from state to state.

Often, businesses simply buy workers compensation insurance because they are required by law and rely on it to provide all the protection they need against employment-related injuries. However, the differences in state laws and benefits can expose businesses to liabilities far greater than expected, and properly insuring these risks may require modifying the policy with one or more standard or manuscript endorsements. Without a proper knowledge of state workers compensation laws, these modifications may be overlooked.

Of all the insurance policies a business may purchase, the workers compensation insurance policy can have the highest premium cost. Workers compensation insurance premium calculations are complex and will differ according to the state(s) in which the employees are located. Businesses, and the insurance professionals they deal with need a thorough understanding of classification procedures and the rating process to accurately rate workers compensation insurance.

How Can I Improve My Rate?

although accidents happen and employees do get injured, a business can still take steps to help control their losses and thus improve their own loss experience. How can you improve loss and your rate? By implementing a safety program with employee training, (ask us about our on-line safety training by Lezage) a business can improve its own experience rating. (Experience rating is a systematic method of modifying premiums to reflect businesses actual loss experience relative to the expected loss experience in the businesses rating class. Experience rating provides an incentive to control losses by rewarding businesses with better-than-average loss experience relative to other businesses in their industry and penalizing those with worse-than-average experience). The National Council on Compensation Insurance (NCCI) is the primary compiler of loss and exposure data that is used to calculate a businesses workers compensation experience modifiers).

Additional Information