workers-compensation wallace specialty insurance
workers-compensation wallace specialty insurance

Worker's Compensation

A worker's compensation policy is really the combination of two different coverage forms, worker's compensation and employer's liability.  In most states, employers are obligated to carry workers compensation.  If an employer carries workers compensation, they generally cannot be sued by an injured employee. 

  1. Worker's Compensation: Coverage is unlimited and will cover the medical expenses and lost wages for an employee injured on the job.  Can also function as long term disability coverage in serious cases.
  2. Employer's Liability:  The limits of coverage that you see on a WC policy are the employer's liability limits.  This coverage is in place for the rare exceptions where the nature of the injury suffered by the employee does allow for the employer to be sued.  Most commonly, this exception is restricted to situations where the employee is killed on the job and the death can be attributed to the gross negligence of the employer.

Among the states we service, Texas is the only state that makes carrying workers compensation optional (with a reporting obligation if you elect not to carry workers compensation).  Still, when an employer in TX does not carry WC, they give up their common law defenses and injured employees are free to sue the employer.  Essentially, the employer can't defend themselves from the suit filed by an injured employee and will be held liable for all expenses resulting from the injury.  So, even though it's voluntary in TX, every employee should feel obligated to carry it.

The cost for Worker's Compensation is based on an exact percentage of actual gross payroll.  A rate is charged based on the occupational class of the employee.  The policy holder has the right to exclude coverage for owners and officers of the business.  Before choosing to do so be aware that many group health insurance policies exclude coverage for work related injuries.  Owners and officers are usually the highest compensated employees in the business.  If they choose to include themselves, the amount of payroll used to compute the additional premium charged to the policy is limited to $62,400 (if business is incorporated) and $50,200 (if business is a sole proprietorship). 

A WC policy is usually set up based on an estimated premium using an estimate of the annual payroll for each premium class.  The policy is paid for based on this estimate.  At expiration, the company performs an audit of the policy, usually mailing a report form to the insured to complete and return along with their 4 most recent quarterly payroll tax reports.  The auditor determines the actual payroll for the policy term and adjusts the premium accordingly.  If the actual payroll exceeds the estimated payroll, the insured is sent a bill for additional premium.  If the estimated payroll exceeded the actual payroll, the company will refund the difference.

As an alternative to the method outlines above, a worker's comp policy can be set up on a "pay as you go" basis.  This obligates the policy holder to report their actual payroll monthly and make a payment based on this report.  There are discount associated with paying under this method.