As a financial services firm, what happens when one of your employees gets injured or falls ill on the job? It could be an accountant who strains her back carrying a heavy file box, a financial analyst who develops carpal tunnel syndrome from computer use, or a stockbroker who slips and falls on the wet floor in the break room. Financial services professionals, like any professional, face the typical hazards of business as well as injuries and illnesses common to office work, making Workers’ Compensation a vital coverage for a financial services business to carry. Workers’ Compensation can provide financial benefits for employees who suffer work-related injuries or illnesses.

What is Workers’ Compensation Insurance for financial services professionals?

Workers’ Compensation Insurance, often called Workers’ Comp, is a form of liability insurance that pays out benefits to an employee if he or she suffers a work-related injury or illness. The insurance policy will pay out lost wages, medical expenses, and rehabilitation costs for an injured employee. In the event of a work-related death, Workers’ Comp can pay for funeral costs and death benefits for surviving family members.

Example:

• One of the accountants at your accounting firm develops carpal tunnel syndrome from too many hours working on a computer during tax season. Workers’ Compensation pays his medical bills and two-thirds of his lost wages while he is away from work recovering.

An employee who accepts Workers’ Compensation benefits agrees not to sue your business for any injury suffered. As a “no-fault” policy, it doesn’t matter if the employer or employee is at fault for the injury or illness—Workers’ Compensation will pay out regardless.

What does Workers’ Compensation Insurance cover for financial services professionals?

Workers’ Comp covers employees at your firm who suffer a work-related injury or illness, including non-U.S. citizens and minors. The definition of “employee” may vary by state, so it is best to check with your state regulations if you are hiring part-time labor, contractors, unpaid workers, or volunteers.

Workers’ Compensation only covers injuries and illnesses that are related to work and not those that have nothing to do with an employee’s job duties. Most of these injuries will occur when the employee is working, ranging from slipping and falling at your own offices to severe eye strain on the job. Coverage may vary from state to state, as each state will define the kinds of injuries or illnesses that Workers’ Compensation covers.

If the injury takes place outside of the office, when an employee is at a client site, job site, or traveling for work, as long as it is work-related, generally Workers’ Comp will cover it. Commuting to and from work, however, are not covered by Workers’ Comp.

Workers’ Comp coverage is not required by states for some injuries and illnesses, and employees may still sue your company in these cases. Workers’ Compensation Insurance will cover legal defense costs and damages for these lawsuits, and this coverage is referred to as employers’ liability insurance, also known as “Part 2” or “Part B” of Workers’ Compensation Insurance.

What does Workers’ Compensation Insurance for financial services professionals pay for?

Injury

Workers’ Compensation will pay for the following in the event of a work-related injury:

• Medical expenses as a result of the injury
• Rehabilitation and physical therapy costs
• A portion of lost wages (usually around two-thirds, but it varies by state) during the time the employee is unable to work
• The injured employee’s impairment (i.e., total or partial, temporary or permanent) will determine the amount of income replacement covered by Workers’ Comp.

Example:

• A financial analyst at your investment firm suffers from severe eye strain while working overtime and needs to stay away from computer screens for three months. His doctor uses the state guidelines to determine that he has a partial temporary disability and Workers’ Compensation pays for his medical expenses and lost wages during his time off work.

Most states require Workers’ Comp benefits to be paid for the full duration of the disability. Some states limit the time lost wages can be paid, particularly for temporary disabilities.

Death

Workers’ Compensation Insurance will pay for the following in the event of a work-related death:

• Funeral costs
• Death benefits for surviving close relatives (e.g., spouse or children)

For surviving relatives such as a spouse or children, death benefits are determined based on an employee’s weekly wages. It’s commonly two-thirds of the employee’s wage at the time of death, though it varies by state. For a surviving spouse, the benefit may be paid until he or she is remarried or deceased. Benefits may be paid until the age of 18 for surviving children.

What are the key exclusions of Workers’ Compensation Insurance for financial services professionals?

Workers’ Comp would not cover these situations listed below:

• Injuries while commuting to and from work
• Drug or alcohol-related injuries
• Injuries sustained while not engaged in work-related activities
• Fights or violence initiated by the employee
• Injuries that are purposefully self-inflicted
• Horseplay or violations of company policy

Example:

• One of the stockbrokers at your brokerage firm is back from a weekend trip to Atlantic City and seems out of sorts. When he has a fall at your office and sustains an injury, your firm requires him to take a drug test. Because he tests positive for illegal methamphetamines in his bloodstream, Workers’ Compensation will not cover him.

Is Workers’ Compensation Insurance required for financial services professionals?

Workers’ Compensation coverage is usually not required until a company has employees that are not owners or partners, or whenever the first hire is made, though the requirements vary by state. Each state regulates its Workers’ Compensation requirements, and some states have large penalties for companies that do not abide by these laws. Make sure to check with regulations in the state that your business operates to ensure you are in compliance.

When it comes to hiring workers who are not full-time employees, like part-time workers, contractors, subcontractors, unpaid labor, or volunteers, requirements for coverage vary by state. Each state has its own rules for what qualifies as an “employee” under Workers’ Compensation, so it is best to check your state’s regulations.

Example:

• You run an insurance brokerage in California, and you hire an outside broker as a contractor while one of your own brokers is on maternity leave. The contracted broker has a slip-and-fall accident at your office. Luckily, you have Workers’ Compensation for all of your contractors, as California’s Workers’ Comp regulations are fairly strict. The broker is able to receive compensation for her medical expenses and a portion of her wages.

How do states regulate Workers’ Compensation Insurance?

Each state determines the regulations and requirements for Workers’ Compensation Insurance, including:

• Who qualifies as an employee
• Benefit amounts for each employee
• Which illnesses and injuries are covered
• Diagnostic tests for impairments and injuries
• Protocols for delivery of medical care

In terms of who provides Workers’ Compensation Insurance, states generally have one of three systems:

• Insurance provided solely by a state-run insurer
• Businesses can choose between insurance provided by a state-run insurer and private insurers
• All Workers’ Compensation insurers are private companies

How much does Workers’ Compensation Insurance cost for financial services professionals?

Pricing for Workers’ Compensation Insurance is based upon a number of factors, including:

• Business location
• Number of employees
• Dollar amount of payroll
  • Example: Your investment management firm has many investors who are paid six or seven-figure salaries.
• Claims history
  • Example: Your tax preparation firm had three Workers’ Compensation claims for carpal tunnel syndrome last year.
• Nature of the business, which is based on the industry classification code
  • Example: Accountants are classified as 8803

Workers’ Comp premiums are usually quoted as a rate per $100 of payroll, and premiums vary. Generally, lower risk industries and professions, such as an accountant, financial planner, or insurance broker, will pay significantly less than higher risk professions, like a roofer or construction worker.

Insurance companies usually apply an adjustment to the premiums known as the “experience rating” for small businesses. If your company has had fewer claims in your history compared to other companies in the same industry, you may be offered a lower premium. The number of claims over a period of time will influence the rating more than the severity of claims. A company with many smaller claims will be penalized more than a company with only a single large claim.

Taking measures to create a safer work environment for your employees is the best way to reduce the premiums for your Workers’ Compensation Insurance.

Final Word

Workers’ Compensation covers the medical expenses and lost wages of employees who have been injured or fallen ill on the job, no matter who was at fault. Pricing for Workers’ Compensation depends on the business location, number of employees, dollar amount of payroll, claims history, and the nature of the business. Industries in which employees face more physical risks and hazards, such as construction, will pay a higher premium for Workers’ Compensation than financial managers, accountants, insurance brokers and other financial services professionals that mainly work from a desk. Financial firms should consider, and may be required to obtain, Workers’ Compensation in order to provide protection in the aftermath of an employee’s work-related injury.