How Does Workers’ Compensation Insurance Work?
How Workers’ Compensation Works
Employers pay a premium to an insurer or a state fund in exchange for workers’ compensation benefits.
Premiums are calculated based on:
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Job Classifications
The types of jobs performed in a company. A company that employs roofers pays a higher premium than a company that employs accountants, because the risk and frequency of injury is greater for a roofing employee. Job classification rates are mandated by the state. -
Annual Payroll
The salaries of all employees performing a given job at the company. -
Previous Claim Activity and Experience
The company’s history of injuries or illnesses that required medical coverage. A company can improve this aspect by implementing loss prevention measures.
The best way for employers to save on their workers’ compensation premiums is to adopt a safety-first culture and prevent injuries before they happen.
If an employee is injured on the job, the employer’s workers’ compensation insurance will respond.