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Restrictions for Workers’ Compensation Insurance

By KJC Law Firm

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Workers’ Compensation Law

In Massachusetts, all businesses must carry workers’ comp insurance for all employees. This includes owners who are considered employees, no matter how many hours are worked per week. Also the Massachusetts workers’ compensation system insists that employees who are in domestic service must be covered if they work more than 16 hours per week.

Exceptions

Partners, sole proprietors, and LLC members do not have to carry coverage or they may choose to be covered under their own workers’ compensation policy. Workers engaged in interstate and international commerce, salespeople in real estate or goods paid by commission, taxi drivers who lease their cabs on a fee basis (not employed under federal law), and people working in interstate/ international commerce who are covered by federal law for injury or death compensation.

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Restrictions

When businesses hire employees, they need to obtain workers compensation insurance. Insurance is important to cover employees who are injured and ill at work. Although it is required there are limits for workers comp across the country. It is important to know the Massachusetts regulations before purchasing coverage. Different states have varying workers’ comp requirements. For example, Rhode Island requires at least 4 employees and Connecticut requires 1 or more employee.

Business owners should know the type of protection and limits under the workers’ comp policy in their state. For workers’ compensation insurance, there are two parts. Part A covers the workers’ compensation policy. Part B covers employers’ liability coverage.

Part A

This section describes that when an employee gets sick or injured as a result of their employment, they may file for workers’ compensation. There is no set limit for how long an employee can be paid if he or she needs to leave work due to illness or injury. The amount paid to injured employees is set by each workers’ compensation system in each state. If an employee was earning a weekly salary of $500 and becomes injured and is unable to work, the workers’ comp benefits is calculated as two thirds of the average weekly wage. It is important to refer to your states workers’ compensation system, as it varies throughout the country. Workers’ compensation coverage is ultimately responsible for paying a medical tab for injury rehabilitation or disease treatment.

Part B

Part B provides employers with liability coverage. This section of the law protects the employer in the event that the employee attempts to prove that the employer disregarded the employee’s needs.  The employer is also protected if the employee tries to sue him or her rather than accepting workers’ compensation.  There are set limits for covering damages which vary based on state. This applies to all states except for North Dakota, Ohio, Washington, Wyoming, U.S. Virgin Islands, and Puerto Rico. These states are monopolistic states which means businesses must purchase workers’ comp coverage from the state workers’ compensation fund. The state fund policies do not provide employers with liability coverage. Lastly, businesses located in multiple or monopolistic states must have stopgap coverage to cover employer’s liability insurance.

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How Premiums are Determined

Premiums are set based on state requirements, industry classifications, payroll, and geography. Premiums are set higher to industries and areas that are prone to natural and manmade disasters. Another major factor for determining premiums depends on the amount and frequency of claims. This is true where higher premiums can be offset by experience ratings. In addition, an experience rating is based off of the frequency of claims from previous years to determine future claims.

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