Know your Workers’ Compensation and Employer Liability policy

Know your Workers' Compensation and Employer Liability policy

If you have a company and that company has employees, you are probably familiar with purchasing insurance such as Workers’ Compensation and Employer Liability that respectively protect the employee from work accidents and the employer from liability claims.

But do you know the policy? Have you examined it carefully?

Almost all states that allow private insurers to offer this coverage use the policy standardized by the National Council on Compensation.

Insurance (NCCI – National Compensation Insurance Council).

A complete policy contains a declaration page (a sort of summary, as in home insurance ) and the following sections:

  • The general section contains definitions and conditions that apply to the policy as a whole.
  1. Workers’ Compensation
  2. Employer Liability
  3. Insurance for other states
  4. Your duties in case of injury
  5. Award
  6. Conditions

Workers’ Compensation

Workers’ Compensation provides relief to your employees who have suffered work-related injury or illness.

And what are these aids? This policy covers:

  • salary losses
  • Medical expenses

But it also compensates dependents of employees who died because of their work.

This insurance allows workers to collect aid for:

  • Wounds and injuries
  • Total or partial disability
  • Death

A value limit does not apply, except for those that are part of the law. Coverage applies to any work-related accident or illness that occurs during the policy period.

Employer Liability

Employer’s Liability provides you with coverage for amounts that you are legally obligated to pay under common law due to a work-related injury or occupational illness of an employee of your company.

Three separate limits apply:

  1. Accidental Bodily Injury – the maximum an insurer will pay for all claims arising from an accident, regardless of the number of employees.
  1. Bodily Injury due to Illness – Policy Limit – the maximum an insurer will pay for Bodily Injury due to Illness of its employee in a policy period, regardless of the number of claims made by the same employee.
  1. Bodily Illness Injury – Per Employee – the most an insurer will pay for damages due to Bodily Illness injury to any employee.

Having Employer Liability coverage is critical to the health of your business as there are situations that the Workers’ Compensation law does not cover, such as exempt workers, undocumented workers, or some non-compensatory injuries.

After all, even an employee who cannot receive compensation through a Workers’ Compensation can still sue you, and Employer Liability takes action to protect you and your company.

Coverage for other states

This portion is used to provide coverage for states that are not specifically listed on the Workers’ Compensation coverage information page. Each state to be covered, that is, the states that your company operates or can operate must be listed on your policy. Remember to notify your insurer whenever you start work in a new state, only then will your coverage go into effect.

Your Injury Duties

This section addresses your obligations when an injury under your responsibility occurs. You must:

  1. provide necessary medical services to the injured party (whether employee or client)
  2. Report the injury to your insurer
  3. Cooperate with the insurer in the investigation and resolution of the claim.

Part Five – Prize

This, simpler and more objective, explains how the cost of the policy is determined.

Part Six – Conditions

It sets out the conditions that apply to the policy, such as cancellation procedures, subrogation, and the insurer’s right to inspect the insured’s workplace.

Every insurance inspection takes place to accurately determine your needs. Don’t make it difficult or try to “make up” reality. Being dishonest or inaccurate with your insurance company will only get you into trouble for future claims.


Every insurance policy includes exclusions so there is no doubt about what will be indemnified. This is important information that must be read carefully and understood, even so, that you can seek extra coverage if an item important to your business is listed as excluded.

Part One – Workers’ Compensation benefits are established by law. So if there are exclusions, they will be few.

The following exclusions apply to Part Two – Employer Liability :

  • The liability assumed under contract
  • Punitive damages awarded because a worker was employed in violation of the law
  • Injury to a worker while employed in violation of the law with his knowledge
  • Obligations imposed by any Workers’ Compensation, such as occupational illness, unemployment insurance, or disability benefits law
  • Injury intentionally caused or aggravated by you
  • An injury that occurred outside the United States, its territories, or Canada (does not apply to residents of these areas who are temporarily outside these areas)
  • Damages arising from violations of employment practices laws, such as discrimination or harassment
  • Injuries covered by a federal Workers’ Compensation law
  • Injury to the captain or crew member of any vessel
  • Fines and penalties imposed for violations of federal or state laws

policy endorsements

Some more specific coverage such as for certain types of benefits or certain classes of employees can only be provided by endorsements added to your policy.

Some types of workers are not covered by state Workers’ Compensation laws, such as domestic workers and farm workers, but the employer may provide coverage for these workers by adding voluntary compensation endorsement to the policy.

How is your prize calculated?

Workers’ Compensation coverage is assessed based on the employer’s payroll. Published manuals contain lists of rate classifications based on the type of work your employees perform and their relative exposures to work-related injuries. For any employer, one or more of these ratings will be selected.

For each job classification, the manual provides a rate per $100 of annual payroll. The rate for each employee’s rate class is multiplied by each $100 of annual payroll applicable to the class. Fares for each class are aggregated and an award discount is applied that varies according to the total premium amount.

A deposit premium is charged at the beginning of the policy period based on estimated payroll.

At the end of the policy period, a payroll audit will be performed to determine the final premium for the policy period. A deal’s actual loss experience is taken into account and a modification factor is used to adjust the manual premium. This is called experience rating. The rate is calculated on the audited payroll by class code, 3 years or 45 months of past loss data, and established rates. The rating factor measures the frequency and severity of claims, rewarding businesses with good security practices and penalizing those with more frequent claims by charging higher premiums.

That is, you will pay an estimated premium amount, but the total premium amount will only be established at the end of the policy period, taking into account your company’s payroll and the number of Workers’ Compensation claims over the period. year.



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