Worker’s Compensation
The Wright Place Insurance Agency
Worker’s Compensation
Workers’ compensation is a form of insurance that provides benefits to employees who sustain work-related injuries or illnesses. It is a legally mandated coverage in most jurisdictions, requiring employers to provide financial and medical support to their employees in the event of work-related accidents or illnesses.
Workers' compensation benefits typically include:
- 1. Medical Expenses
Coverage for medical treatments, surgeries, hospital stays, medications, and rehabilitation services related to the work-related injury or illness.
- 2. Lost Wages
Compensation for a portion of the employee’s lost income due to the inability to work while recovering from the injury or illness.
- 3. Disability Benefits
Payments to employees who experience temporary or permanent disabilities that limit their ability to work or earn income.
- 4. Vocational Rehabilitation
Assistance provided to injured employees to help them return to work through retraining, job placement services, or accommodations.
- 5. Death Benefits
Financial support and benefits provided to dependents of employees who die as a result of work-related accidents or illnesses.
Workers’ compensation insurance aims to protect both employees and employers. By providing medical care and wage replacement to injured workers, it helps ensure that employees receive necessary support while recovering. At the same time, it provides employers with protection against lawsuits related to workplace injuries, as employees typically relinquish their right to sue the employer in exchange for receiving workers’ compensation benefits.
The specific rules and regulations governing workers’ compensation vary by jurisdiction, so it is important for employers to understand and comply with the requirements in their respective locations.
Virginia’s Coverage Requirements
Generally, a business with more than two employees is required to carry workers’ compensation coverage. An employee is viewed broadly under workers’ compensation law and includes part-time, seasonal, and temporary workers, minors, trainees, immigrants and working family members.
For a contractor or other business that hires subcontractors to assist in their trade, business or to complete a contract, the subcontractors’ employees are included when counting the total number of employees to assess when coverage is required. If the total of the contractor’s employees plus the sum total of subcontractors’ employees is more than two, then coverage is required. This requirement applies regardless of whether the subcontractor has their own workers’ compensation coverage. For additional contractor information read the Contractor Information Sheet. An employer that is not required to carry coverage under the law may obtain coverage voluntarily.
What types of workers are considered employees eligible for workers’ compensation?
The state considers all of the following to be employees for workers’ comp purposes:
- Full-time or part-time workers
- Corporate officers and managers of limited liability companies (LLCs), even if they’re not actually performing job duties for pay.
- Family members that work for the business
- Employees who work on a temporary or seasonal basis
- Immigrants or workers who are being trained.
- Workers younger than age 18
- Employees working for nonprofit organizations such as churches, charities, and others.
Are independent contractors required to have workers’ comp coverage in Virginia?
Independent contractors are not required to have workers’ comp coverage. However, if the state determines the employer / independent contractor work relationship is actually an employer / employee one, your business could face penalties and you would be required to provide coverage. Indicators that a contractor is actually an employee include the employer:
- Controlling the work to be performed
- Being able to hire the person doing the work.
- Being able to fire that person.
- Paying wages to the person who completes the work.
How does workers’ comp work in Virginia?
Virginia business owners can compare quotes and purchase a policy from licensed insurance companies.
Virginia employers who qualify can self-insure their workers’ compensation claims. This means they’ll pay for their own workers’ comp claims rather than submit them to an insurance company. To qualify for self-insured status, they must:
- File an application.
- Submit audited financial statements for the last three years in business.
- Provide a loss run that shows all closed and open claims within the last three policy years.
- Pay a $200 filing fee.
What is the average cost of workers’ compensation insurance in Virginia?
The cost of a workers’ compensation policy is determined by three main factors:
- The type of work performed (classification code),
- Payroll; and
- Experience or loss history.
Estimated employer costs for workers’ compensation in Virginia are $0.75 per $100 covered in payroll.
What are the penalties for not having workers’ comp insurance in Virginia?
Violating the Virginia workers’ compensation statute is a serious offense. If you fail to comply, you may be assessed and given a civil penalty of $250 for each day you fail to maintain insurance, up to a maximum civil penalty of $50,000.
Frequently Asked Questions:
I only hire independent contractors; do I need coverage?
Designating a worker as an “Independent Contractor” or paying them on a 1099 does not define a worker’s employment status. Whether a person is an “employee” or not is governed by common law principles.
A person is generally considered an employee if:
- They are selected,
- Can be dismissed,
- Earn pay or wages, and
- Control is exercised over the means and method by which the work is performed.
The last factor is given the greatest weight. If inquiry indicates that “control” is exercised over the worker, the worker should likely be counted as an employee for coverage purposes.
Are volunteers employees?
Generally, volunteers that are not paid or compensated are not employees under the Virginia Workers’ Compensation Act. However, should a business wish to cover a volunteer they can be endorsed onto a policy.
Does Virginia offer a workers’ compensation insurance discount for a Drug Free workplace?
Yes, insurers are required by law to provide a premium discount of up to 5% to employers that institute and maintain a drug-free workplace program. Each insurer must establish their own discount criteria.
My insurance carrier would not renew my policy. Now they want me to participate in an audit and are requesting all kinds of information. Do I have to cooperate?
You are required to cooperate with the audit. With workers’ compensation insurance, an insurance carrier is only able to estimate exposure at the beginning of the policy period. It is therefore common practice when the policy year ends for the insurance carrier to conduct an audit to determine actual exposure over the policy year. The insurance carrier can also charge audit premium if through audit they determine exposure was higher than originally estimated.
We have been notified that our classification codes changed and our insurance premium went up significantly. How can I contest this?
Workers’ compensation insurance is under dual regulation in Virginia, as in most states. For matters that pertain to class codes and underwriting the best source for information is the Bureau of Insurance in State Corporation Commission. E-mail: bureauofinsurance@scc.virginia.gov or Phone: 804-371-9185
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