Health Insurance vs. Worker’s Compensation: Coverage Comparison

Ezra Cabrera

Updated: December 22, 2020
As a business owner, understanding the differences between insurance policies can be challenging. And when it comes to insurance benefiting employees, the most common are health insurance and workers’ compensation insurance. So, if you want to protect both your business interests and the welfare of employees, it’s vital to understand how these policies differ.

What does workers’ compensation insurance cover?

This policy benefits employees if they suffer a work-related injury or illness. To be more specific, workers comp helps businesses cover expenses associated with:

  • Medical care needed to treat the illness or injury sustained at work.
  • Wages or salary while the employee is on medical leave.
  • Disability compensation if applicable.
  • In case the employee passed away, this insurance may also cover funeral expenses.

Of course, the policy has limitations when it comes to the injuries or illnesses covered. In general, the most common injuries claimed through workers compensation are:

  • Vehicular accidents while performing work-related functions.
  • A fall or slip while at work.
  • Health problems caused by exposure to toxic chemicals.
  • Carpal tunnel and other injuries related to repetitive movement.

The list of inclusions and exclusions of a workers’ comp insurance vary from one provider to another. It’s vital to compare because every business has unique requirements and risk exposure. For example, a construction-related business will need a different level of coverage than a retail store.

How to choose the best worker’s compensation insurance

In choosing the best worker’s compensation coverage for employees in your company, pay attention to the following tips:

1. Look for an experienced professional agent. Working with a good agent is important. It’s the agent’s responsibility to provide you with the best policy options. If possible, the agent needs to have experience working with businesses within your industry. In addition to assisting you to choose the right policy, the agent should also provide expert advice on how to reduce premiums by implementing safety controls.

2. Know the specific policy requirements in your state. Every business owner should know that worker’s compensation requirements vary from one location to another. If your business operates in several states or has employees that work in different regions, there’s much you need to consider. As you know, there are individual state laws that mandate how much coverage an employee should have. As such, you need to ensure that all your workers have the right coverage to ensure compliance.

3. Plan for safety measures. Preventing and reducing the risk of work-related incidents protects your employees. Not only that, it can help reduce the insurance premiums. If there isn’t one, you need to implement safety measures and make it part of the company’s culture. There are plenty of resources you can use to strengthen and reinforce existing safety protocols practiced within your company.

4. Understand insurance coverage. Most worker’s compensation insurance policies include two parts. The first part is coverage for bodily injury sustained at work caused by an accident, while the second part covers anything related to any medical condition aggravated by unfavorable working environment. In addition to knowing what the insurance covers, it’s essential for an employer to understand the extent of their liability. This will protect them in case of any third-party claims that may arise.

5. Regularly review the policy. It’s a good practice to review any insurance policy every year. You need to discuss with your agent any changes in the business. For instance, changes in the work or function of an employee will affect the premium and coverage. By regularly reviewing the policy, you can ensure that your employees have the right coverage. And at times, taking note of these changes also help you save money.

Finding a worker’s compensation insurance policy doesn’t have to be daunting. When you know what to focus on, you and your agent can work through the process smoothly.

How is health insurance different and what does it cover?

Unlike workers’ comp, health insurance covers illnesses or injuries sustained outside work. It’s not mandatory for employers to provide health insurance for their employees. But, many companies do offer it as part of the benefits package. The company can choose to pay a part of the premium or the entire amount.

Having health insurance is necessary because individuals may not be able to afford medical care without it. It serves as the individual’s protection and safety net in case of sickness or injury. Depending on where the business is located, workers’ compensation is often mandatory. The benefits and coverage of these policies are different, but the purpose is the same – which is to ensure the health and welfare of an individual.

The different health insurance options for businesses

Most small companies choose group insurance for their employees. While this may be the most common choice, it isn’t the only option. Choosing the right policy depends on the size and structure of the business. In addition to small group insurance, the other options include getting self-funded plans or a Health Reimbursement Arrangement (HRA).

What you may want to do is speak to an insurance agent about these options. This way, you can determine which option is most suitable for your needs, while guaranteeing it’s for the mutual best interest of your employees and the business.

Other insurance that businesses can provide their employees

In addition to workers’ compensation insurance, businesses may also provide employees with disability insurance. This insurance covers disability resulting from non-work-related injuries. It could be a temporary or permanent disability, which the policy both covers. Like health insurance, disability insurance isn’t mandatory.


Final thoughts

There are many intricacies involved when it comes to business insurance. What’s most important to consider, is which policies are mandatory and which aren’t. Sometimes, the type of business and the number of employees also matter. Guidelines also differ from state to state. Understanding these guidelines and how they apply to your business is the first step. Once you know what you need to provide for employee protection, the next step is to look for a provider. Lastly, you can compare plans to find the best coverage at an affordable premium.

Ezra Cabrera
Ezra Neiel Cabrera has a bachelor’s degree in Business Administration with a major in Entrepreneurial Marketing. Over the last 3 years, she has been writing business-centric articles to help small business owners grow and expand. Ezra mainly writes for SMB Compass, but you can find some of her work in All Business, Small Biz Daily, LaunchHouse, Marketing2Business, and Clutch, among others. When she’s not writing, you’ll find her in bed eating cookies and binge-watching Netflix.

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