Mar 01 Occupational Accident Insurance vs Workers’ Compensation Insurance – What’s The Difference?
Simply put, workers’ compensation insurance provides wage replacement and medical benefits to employees. Occupational Accident Insurance provides similar coverage, but for independent contractors and employees not covered under a workers’ comp program.
The insurance coverage you need depends on your workforce, the risk you’re willing to assume, and your state’s laws. Consider these factors when deciding between workers’ compensation insurance and occupational accident insurance.
Occupational Accident Insurance
Occupational accident coverage does provide a degree of coverage for accidents or injuries while a person works. It is optional coverage and typically costs about 50% less than workers’ comp coverage. It may suit companies that do not need all of the benefits that a comprehensive workers’ comp policy provides.
Occupational accident insurance covers lost wages, medical expenses, and death benefits up to the policy limit. Additionally, businesses can choose the deductible, limits, and disability coverage they want to buy.
However, occupational accident insurance usually provides little or nothing for legal expenses. Since policies do not include defense costs, business owners need to understand they’re assuming financial risk.
As an employer, you are responsible for any legal obligation to an employee not covered by your occupational accident insurance coverage. The initial lower cost sometimes blinds business owners to the potential of huge lawsuit losses.
Choosing the wrong coverage options could expose your business to financial obligations beyond what your business can handle. This is especially troubling since very few statutory limitations exist for occupational accident lawsuits. Theoretically, an injured or ill person could sue at any time.
Employers also bear the burden of proof in lawsuits. In other words, the business must prove that the injury or illness is not, or is no longer, the cause of the person’s condition. This can include investigative costs, not just legal fees.
Lawsuits by aggrieved persons are often lengthy, complex, and costly. Consequently, it is important you have an appropriate policy limit. Policy limits can vary from $1M to $5M and employees can potentially win judgements reaching the policy limit for pain and suffering and punitive damages.
Occupational accident policies should also include contingent liability coverage to revert coverage to state limits if the worker moves to another state.
Workers’ Compensation Insurance
Most business owners choose workers’ compensation over occupational accident insurance for several reasons. It is state-regulated and pays certain lost wages and all medical expenses (even if they crop up after the injury or accident). Payouts for worker injuries and deaths meet at least minimum requirements and they can also exceed policy limits.
Unlike occupational accident lawsuits, the burden of proof lies with the worker, not the employer. The plaintiff must prove the injury or illness caused their condition. As well, under workers’ compensation laws, a person cannot sue for pain and suffering and usually cannot receive a judgement for punitive damages, either.
Since coverage provides ample protection, it is less likely your business will face a lawsuit and you have coverage for a paid defense if they do. WC also enforces tough statutory limitations.
Not all states allow businesses to meet their workers’ compensation obligations through occupational accident insurance. Additionally, each state has very specific requirements and ignorance is not an acceptable excuse for violations. You need an expert in insurance and its intricate state specific laws.
Choosing appropriate insurance coverage requires expertise. Gilbert’s Risk Solutions understands the intricacies of workers’ compensation and occupational accident coverage. We can advise which coverage suits your business to minimize risk and cost.
We’re local and reliable and we’ve helped people for over 160 years. Let us help you get the most out of your insurance.