Understanding Workers’ Compensation Insurance in Georgia
Workers’ Compensation insurance is mandatory for most businesses. Unfortunately, it can also be very confusing. Here is a breakdown of some of the important parts that will hopefully help further your understanding!
Historically, injured employees were able to receive compensation from employers if the employers were found to be negligent. When an employee was injured they would have to bring the employer to court where negligence would be looked at from both sides. This created a lot of time consuming, expensive litigation. The idea of workers’ compensation is to create a “no fault” system, which would decrease the burdens of litigation. Employees can now receive compensation, but they forgo their right to sue employers.
The general rule of thumb is that all businesses with employees need Workers’ Compensation insurance. However, the requirements vary by state so it would have to be looked up on a case to case basis. There are four main exceptions…
Sole Proprietor or Partnership
Most states allow these types of business to opt out of coverage since the only employees are owners.
Some states allow businesses with under a certain number of employees to opt out.
Agriculture and Family Exemptions
Some states say that family businesses can opt out.
Typically Workers’ Compensation is not required for independent contractors. However, you have to be sure that you are correctly labeling them as independent contractors before deciding they don’t need coverage. The best option is to check with your insurance professional.
Now on to what you will be paying. The premium is calculated by multiplying your company’s payroll by the classification code’s value. This value is determined by the riskiness of the type of job. Depending on the state, this base premium can be adjusted up or down using the company’s “experience rating.” This experience rating is determined by the company’s prior loss history.
What the policy covers differs depending on state. A lot of states are pretty generous with their compensation plans. Workers’ Compensation covers employee injuries on the job and within the scope of employment. These coverages are available regardless of fault.
Most Workers’ Compensation policies are written in two parts. The first part, Part A, has no limits and is where the insurer takes on the obligation to pay compensation to the injured employees. The second part, Part B, does have limits and is where the insurer takes on the obligation to pay compensation to employees for injuries not covered under the state’s compensation system. This part can differ depending on state because different states exclude different coverages.