Workers’ compensation and occupational insurance both provide a level of protection for employees in the event of workplace injuries. Whether you are a startup business, a midsized corporation, a full-time employee, or independent contractor, it is important that you understand the differences between the two in order to protect your when it comes to workplace accidents.
Workers’ compensation is a state-regulated requirement for companies that employ a minimum number of workers, or employees who work a certain number of hours per week as mandated by law. The minimum number employees differ by state, but in some instances it refers to one or more employees, while others allow for 5+ employees.
Workers’ compensation may cover wage loss benefits, medical treatment and related expenses, and rehabilitation for employees who suffer an injury at work, or who get sick due to factors within their workplace environment. The insurance also includes employer liability coverage, meaning that employers receive a level of protection if the worker decides to sue in relation to their workers’ comp claim. The legal defense costs are often covered up to the policy limits. Employers still have a responsibility to maintain a safe work environment for their workers.
Occupational accident insurance is a policy that is designed to offer benefits to independent contractors and employees who are not covered under a workers’ comp program. This type of insurance may provide medical, disability, and accidental death and dismemberment benefits, but unlike workers’ compensation – it is not state-regulated. Policies may cover wage loss benefits, medical expenses, and rehabilitation costs for employees or covered independent contractors, but only up to policy limits. Employers are allowed to choose their coverage and deductible amounts based on their own perceived risk.
Workers’ comp involves a higher cost to companies, but it also offers them more comprehensive coverage, especially in terms of their own liability – a component that is not a part of occupational accident insurance.
In some states, employers who choose occupational accident insurance can opt of the required workers’ compensation program. While the employer still has a legal obligation to employees who suffer injuries or death on the job, it comes at a much lower cost compared to workers’ comp.
Employers get statutory benefits with workers’ comp but when signing up for occupational accident insurance, they must make the following choices:
- The limit of liability to carry per accident
- The deductible to assume per accident
- The level of disability coverage to provide
- The level of death benefits to provide
Companies will still be responsible for legal obligations to their employees that are not covered by occupational accident insurance. Choosing the wrong coverage option can expose a company to dramatic financial losses – a problem that those with workers’ compensation insurance are less susceptible to.
Disadvantages to Occupational Insurance
While occupational insurance allows companies to save money when compared to workers’ comp, and give employers control of the type and amount of coverage to provide employees, there are several disadvantages:
- The employer must bear the burden of proof in the event of a lawsuit
- Employees can win claims for pain, suffering, and punitive damages up to a certain limit
- If an employee’s expenses exceed coverage limits, employers will have to cover the excess costs
As an employer, consult with an experienced attorney to ensure you understand the risks associated with workers’ comp vs. occupational insurance.
As an employee, talk to a lawyer if you have been hurt on the job to understand the differences on how to proceed with a claim depending on the coverage your company offers.