The ins and outs of worker's compensation

As an employer, you want to provide the safest environment for your workers. Yet even with extreme precautions, accidents happen. Worker's compensation is designed to provide medical care and compensation to those who are injured in on-the-job accidents—and to protect employers from lawsuits resulting from workplace accidents.

Each state has a worker's compensation act and most states require employers to carry insurance no matter how few employees they have, according to the U.S. Department of Labor's Employment Standards Administration (www.dol.gov/esa). Some states do offer exemptions, though, for businesses employing a small number of people. So check with your state's act.

This insurance covers workers injured on the job, whether they're hurt while at your facility or elsewhere and no matter whose fault the accident was. It also covers work-related illnesses. While state laws governing the amount and duration of benefits and the provision of medical and rehabilitation services may differ, they're all designed to provide employees with high-quality medical care and prompt payment of benefits.

Most employers obtain coverage through private insurance carriers, according to the Insurance Information Institute. Some access coverage from state and federal funds, and a handful use their employer's self-insurance. If you fail to maintain coverage or to pay compensation, you could face severe penalties.

How do you know whether you're paying a fair amount for insurance? The cost of your worker's compensation policy is based on your payroll, type of business risk, and your loss history. If you think your premiums are too high, contact your state's division or ask your insurance agent or broker about ways to trim your costs.