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How Are Workers’ Comp Packages and Settlements Calculated?

Every business owner wants to ensure a safe working environment for their employees. But still, in 2019, industry employers reported 2.8 million non-fatal workplace injuries and illnesses, according to the U.S. Bureau of Labor Statistics.

Fortunately, workers’ compensation insurance provides financial compensation to employees that experience work-related injuries or contract an occupational illness. The responsibility to maintain a policy and educate employees about their rights and benefits falls on you—the employer.

To help educate your employees about this issue (and help you understand what you’re paying for in a policy), you should get to know how insurers calculate workers’ compensation payments.

Coverage and Qualifying Injuries and Illnesses

Workers’ compensation insurance covers health care and rehabilitation costs for workers injured in accidents at work, as well as benefits for dependents in cases of fatality. It also covers occupational illnesses or injuries that develop over time during work. In general, the following conditions qualify an employee for workers’ compensation benefits:

How Do Insurers Calculate Compensation Packages?

After a workers’ compensation claim is submitted, the insurance company reviews all the information and comes up with a compensation package to offer the employee. Insurance companies calculate benefits based on the severity of the injury and cost of treatment and the employee’s average weekly wage. Compensation packages can include:

The Alternative: A Workers’ Compensation Settlement

If an employee is unsatisfied with the compensation offered by the insurance company, they can reject the package and pursue a workers’ comp settlement. When an employee chooses this option, they can then work with a legal representative to calculate the amount that they see fit and present the counteroffer to the insurer.

The two parties (the employee’s representative and the insurance company) then negotiate until they reach a workers compensation settlement amount. If the two parties cannot agree on an amount, a judge can make the final ruling. The insurer then pays the settlement to the employee in a lump sum or as a scheduled payment plan.

The Employer’s Role

Aside from choosing a trusted insurer to handle claims, the employer plays a limited role in the workers’ compensation or settlement process. The important thing is that they work on prevention first and fulfill these duties:

Fair Financial Resolutions

Workers’ compensation claims, though avoidable, can never be entirely prevented. Fortunately, workers’ compensation coverage at least offers a financial resolution to these occurrences. By working with a reputable insurance provider, employers can ensure that their employees receive fair and timely compensation for their injury or illness.