Tuesday, September 16, 2014

Workers Compensation Insurance Explained

Workers compensation is a type of commercial coverage that pays the wages as well as medical costs and potential lost income if permanently disabled while performing job-related duties. The insurance plans will pay those costs in exchange for the worker not filing a lawsuit against his or her job provider. The tacit agreement to avoid litigation in the event of bodily injury is called the "compensation bargain."

First created in Georgia and Alabama in 1855 to give injured employees the right to sue their employers if they are injured while on the job, compensation has grown in scope and has been law in every state for many decades. The first statewide workers compensation law was enacted in Maryland in 1902 followed by the enactment of the first federal law covering federal employees in 1906. And by 1950, every state had some sort of law in place protecting people in the event of being injured while working.

As might be expected, the insurance protection varies by state, but the basic elements remain essentially unchanged. Weekly payments can be made to injured employees in lieu of hourly wages or salary compensation, and some states require specific payments for temporary as well as permanent disability. If working in a dangerous job and a finger is lost, for example, a flat rate payment of several thousand dollars might be required by state law.

Other benefits for injured employees include payment and reimbursement for medical costs and financial benefits payable to those who are disabled permanently. And if killed on the job, the surviving family members would be entitled to compensation for the lost income.

While Workers Compensation insurance provides comprehensive benefits, there are limitations. In general, money will not be paid for punitive damages even if an employer were found to be negligent, and there is no penalty provided for pain and suffering. So if suffering a serious injury due to negligence of a job provider that causes a great deal of pain and suffering, the only way that person could be paid would be to file a lawsuit, which would be allowed due the fact the state law does not provide relief for such acts.

And while there are laws enacted in every state, Texas gives job providers the option of refusing to participate in the state system for paying those who are injured while employed, but that leaves them vulnerable to costly lawsuits. Still, about 65 percent of jobs in Texas are covered as the employers recognize the sensible nature and protection provided by the insurance policies.