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Worker's Compensation - Definition

Written by Jason Gordon

Updated at December 16th, 2020

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Workers Compensation Definition

Workers compensation refers to an approach that helps workers in receiving monetary incentives in the event of injury or disability during the tenure of employment. It is considered to be a form of insurance that gives workers or employees protection against prospective injuries or disabilities at work.

A Little More on What is Workers Compensation

Workers who receive the benefit of workers compensation lose the authority to file a suit against their employer in case of carelessness. This is more likely a compensation bargain that safeguards the interests of both employees and employers. While workers usually sacrifice further recourse in return for a sure amount, employers agree to be liable for a specific amount of compensation instead of bearing huge damages of a big lawsuit based on negligence. Ever party including taxpayers dont have to bear legal expenses required for processing a suit.

Coverage Offered by Workers Compensation

Employees who suffer injury or disability during the course of work get their medical expenses covered. For instance, a factory worker will get workers compensation if some mishappening takes place at work. However, they wont be eligible for the claim if they meet a car accident while they are on their way to work. In some cases, workers get the amount that is equal to sick pay while being on medical leave. In case, the employee or worker dies during the course of employment, his or her family will be eligible for claiming workers compensation fund. Though the employers are free from any negligence under the compensation bargain, but it doesnt mean that compensation tends to be a foregone result. There are situations when it is unclear to assess if an employer is responsible for the workers injury. Also, there can be cases when injuries at work are not reported in some sectors. In legal terms, informing an employer about a work related injury doesnt involve any penalties. However, one cannot apply this interpretation on sectors such as construction factories where the majority of tasks are based on workers strength and physical capabilities. Some workers can also misuse this cover by claiming that the injury took place at work, even if it took outside the work premises. People should not confuse workers compensation with unemployment income or disability insurance. This compensation is only applicable for workers who get injured or hurt at work. However, disability insurance offers payment irrespective of the timing and location where the injury or disability takes place. Unemployment has nothing to do with workers compensation fund. While disability incentives and unemployment income involve taxes, workers compensation cover is exempt from any kind of taxes.

Workers Compensation at the State and Federal Level

In the U.S., independent states regulate and organize workers compensation funds. The U.S. Department of Labor, that conducts Office of Workers Compensation Programs, has the sole responsibility of devising compensation rules for federal workers, longshoremen and coal miners. As there are no set rules and policies for workers compensation, the payments for the similar nature of injury differ in several states. Hence, it is advisable for employees and workers to research about the state and firms compensation policies, in case of any unfortunate circumstances. As per the latest reports, the benefits offered by the workers compensation cover have reduced significantly in most of the states. Even if workers face kind of work injury, the compensation will depend on the location where they reside. This makes it more crucial to study compensation policies locally. Also, studies have stated that this inequality in workers compensation has a correlation with income inequality issues.

References for Workers' Compensation Catastrophe Cover

https://www.investopedia.com Careers Salaries & Compensationwww.businessdictionary.com/definition/workers-compensation-catastrophe-policy.htmlhttps://www.insuranceopedia.com/definition/.../workers-compensation-catastrophe-co...

Academic research Workers' Compensation Catastrophe Cover

Catastrophic responses to catastrophic risks, Epstein, R. A. (1996). Catastrophic responses to catastrophic risks. Journal of Risk and Uncertainty, 12(2-3), 287-308. Medical Savings Accounts: Lessons From China: China's medical savings accounts coupled with catastrophic insurance have yielded mixed results, so far., Yip, W. C., & Hsiao, W. C. (1997). Medical Savings Accounts: Lessons From China: China's medical savings accounts coupled with catastrophic insurance have yielded mixed results, so far. Health Affairs, 16(6), 244-251. Catastrophe risk, insurance and terrorism, Ericson, R., & Doyle, A. (2004). Catastrophe risk, insurance and terrorism. Economy and Society, 33(2), 135-173. Experience modification rating for workers' compensation insurance, Everett, J. G., & Thompson, W. S. (1995). Experience modification rating for workers' compensation insurance. Journal of Construction Engineering and Management, 121(1), 66-79. Pollution liability insurance and catastrophic environmental risk, Katzman, M. T. (1988). Pollution liability insurance and catastrophic environmental risk. Journal of Risk and Insurance, 75-100. Comparative analysis of large scale catastrophe compensation schemes, Freeman, P. K., & Scott, K. (2006). Comparative analysis of large scale catastrophe compensation schemes.

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