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Work Accidents and Workers Compensation: What’s the Difference?

Work Accidents

Whether you’re a business owner or an employee, it is important to understand how work accidents and illnesses are covered in your organization. While most employees are protected by workers compensation, some are covered under an occupational accident policy instead. Both types of insurance are designed to protect and compensate employees in the case of injuries on the job. In many ways, they are similar, but there are important differences to be aware of. These differences affect the employer’s costs and liability, as well as the level of protection given to employees.

Workers Compensation

The law requires most employers to obtain workers compensation coverage for their employees. This is a government-regulated policy that offers coverage for both work accidents and illnesses. Workers compensation policy and claim paying practices are monitored and regulated by governmental bodies in every state. The price of workers compensation coverage is based on an evaluation of the risk level of the occupation, coverage limits and annual payroll, and is typically more expensive than occupational accident insurance.

The level of protection and benefits provided by workers compensation are much more extensive than that of occupational accident insurance. Under workers compensation, employees are covered for all work-related injuries or illnesses, regardless of who is at fault. If the effects of a work-related injury or illness are permanent, workers compensation benefits could be paid to the employee for his or her entire life. With this type of coverage, an employee does not have the right to sue his or her employer. Thus, it protects employers from liability.

Occupational Accident Insurance

Although workers compensation is required for most employees, there are some cases where it is not required. Laws vary by state; in Texas, no company is required to purchase workers compensation coverage. Another common scenario is when a company hires contractors rather than employees. In these cases, the employer has the option of getting either workers compensation or occupational accident coverage.

Because occupational accident coverage is not required by law, the policies are not regulated but rather are determined by competitive forces. A company may opt for occupational accident coverage because the premiums are generally less expensive. However, this type of coverage is more limited. You should read your policy carefully.

As the name suggests, occupational accident coverage only provides benefits in the case of an accident at work; it does not cover illnesses. While workers compensation can pay an employee for life, occupational accident policies come with a limit of reimbursement and a preselected time period for payment. Without workers compensation, an employee can sue the employer and needs to show only 1% negligence on the employer’s side, so employers take a larger risk when they choose this type of policy.

In all, workplace compensation provides greater protection for both employers and employees, although the premiums for occupational accident insurance are usually lower. Consider this when deciding upon a plan for your workplace, or when evaluating the policy that protects you as a worker. While we hope that you and your employees always stay safe, you never know when that policy could become important.