Workers’ Compensation vs Employers’ Liability: What Should You Choose From a Company?

Feb 25, 2020Blog0 comments

As a business owner, there are several types of insurance that you must carry to protect yourself. Two of those types of insurance are workers’ compensation and employers’ liability. There are many things to know about these two different insurances.

Let’s look at workers’ compensation vs employers’ liability to get a better understanding. 

What is Workers’ Compensation Insurance

Workers’ compensation insurance is a business necessity. In fact, most states will require a business to have it. Workers’ compensation is insurance that will cover your employees.

It kicks in and covers them if they have an accident at work to protect both you and your employee. Typically it doesn’t matter whose fault it is, the insurance will cover their expenses. 

What Does Workers’ Compensation Cover?

There are several things that workers’ compensation covers for your employees. The biggest being medical bills. If your employee has an injury then your insurance will often pay their bills.

Your insurance may also pay for their wages while they recover from injuries.

If the employee dies from the injury your insurance covers expenses for funerals as well. It may even pay the spouse and family of the deceased employee. Finally, if there is a lawsuit your insurance will cover expenses for the lawsuit. 

Why Do I Need Workers’ Compensation Insurance?

Businesses need workers’ compensation insurance because it has the potential to save them money and keep their doors open. If there is an accident the expenses can be overwhelming and you may not have the money to pay them.

This is where your insurance comes in to cover the costs if there is an accident. While it may seem expensive to carry the insurance, it will save you money in the long run. 

How Expensive is Workers’ Compensation Insurance?

Workers’ compensation can be expensive depending on the type of package you choose. There are a lot of factors that go into the fees. The size of your business, how many employees you have, and risk factors.

A larger company will have a higher premium than a smaller business. If your business is high-risk you’re more likely to have higher premiums. Having a large number of previous claims may cause higher premiums as well. 

What is Employers’ Liability Insurance? 

Employers’ liability insurance is also insurance that relates to employee accidents, it is a little different though. Employers’ liability insurance will cover you if your employee chooses to sue you. 

Employers’ liability insurance covers lawsuits based on an injury from any party. The employee may sue you, and those expenses are often paid by workers’ compensation.

If the employee sues a third-party, that third-party may turn to sue you. Employee liability insurance will pay any expenses from third-party lawsuits. 

For example, let’s say your employee is using a forklift and has an injury. Your employee may sue the forklift company due to faulty equipment. In turn, the fork life company may sue you saying you failed to maintain the forklift. Your employer liability insurance would cover your lawsuit from the forklift company. 

What Does Employers’ Liability Insurance Cover?

Employers’ liability insurance covers most (if not all) legal costs. It will cover legal fees, court costs, and settlements or judgments.

Carrying this insurance may be costly but will save you money if you face a lawsuit. There are several actions employers’ liability insurance cover. 

Third-Party 

As in the example above. A third-party action is when another party sues you. It will cover your legal expenses related to the lawsuit. 

Loss of Consortium 

If a spouse sues you for losses based on the accident. If the employee dies or has serious injuries their family can sue you. Loss of wages, wrongful death, and other losses can result in a lawsuit. Your insurance will help cover your expenses for the lawsuit. 

Dual-Capacity 

If the employee has more than one lawsuit against you. For example, if the employee was using a product you manufacture at the workplace and has an injury. They could sue you as both an employee and also sue you as a consumer of a product you manufacture. 

Consequential Injuries

Your insurance will pay for consequential injuries caused by the original accident. For example, if the employee’s injury causes them to need help moving. Let’s say a spouse helping them suffers a back injury. The spouse could sue you because they would not have had the injury if it wasn’t for the original injury. 

How Do I Get Employers’ Liability Insurance?

Employers’ liability insurance is usually offered as an add-on to workers’ compensation insurance. There are fees added into the premium for the extra coverage but it could be worth it. You will need to speak to your insurance provider to determine the costs. 

Many things go into the final costs much like other insurances. The size of the business, number of employees, and risk factors can affect your premium rates. 

Workers’ Compensation vs Employers’ Liability Insurances

As you can see these two types of insurances are similar but very different. The things covered will vary depending on the type of insurance. Workers’ compensation is almost always insurance you must have.

Most states make it mandatory, however, employers’ liability can be optional. You will need to check with your state mandates to determine if it’s mandatory or not. 

Having both types of insurance is a smart decision for most businesses. The premiums may be expensive but the costs of a lawsuit can overwhelm a business. This is especially the case if your business is small or new. Protecting your business is a good way to ensure you will not have to pay expenses out of your pocket. 

Workers’ compensation vs employers’ liability insurance can be tricky to understand. Many insurances will combine the two and help to find rates you can afford. Doing some research and speaking to your insurance provider can keep you protected. 

The good news is, we can help. If you’re still looking for the right workers’ compensation, employers’ liability insurance, or both contact us today to learn how we can help. 

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