What is Workers Compensation Insurance?

Each year, tens of thousands of employees suffer work-related illnesses and injuries. Many need to be hospitalized, and some injuries and illnesses even prove to be fatal. When an employee becomes injured or sick because of their job, their employer is usually responsible for any medical costs and lost wages associated with the injury or illness. Workers compensation insurance helps businesses in New Jersey better protect themselves against these potential costs.

Workers comp insurance provides protection against liabilities that businesses would face if one of their employees had a work-related injury or illness. Most policies help provide coverage for injured or sick employees’ medical expenses and lost wages.

What New Jersey Businesses Need Workers Comp Insurance?

Almost all businesses in New Jersey must either have workers compensation insurance or be approved by the state to self-insure if they have at least one employee and aren’t covered under a comparable federal program. Because self-insuring requires a sizeable amount of capital and an ability to prove a business’ permanence, most businesses purchase a workers comp policy.

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These requirements apply regardless of whether a business is a corporation, partnership, limited liability corporation, or sole proprietorship. Failing to comply with the state’s laws can result in a fine of $5,000 per 10-day period without coverage, and it can be even more devastating if a worker is injured or becomes sick. 

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Who is Covered by Workers Comp Insurance?

Most workers compensation policies cover employees, who are usually workers that get W2s at the end of the year. Most policies cover employees regardless of how many hours they work or what their position within the company is.

How Are Workers Comp Rates Determined?

Underwriters consider many factors when they’re determining how much a business’ workers compensation policy will cost. A few factors that they take into account include the following:

  • How many employees a business has
  • How much a business’ employees earn
  • What industry a business operates in
  • Whether a business has previously filed workers comp claims 

Does Workers Comp Insurance Stop Injured and Sick Employees from Filing Lawsuits?

One of workers comp insurance’s main purposes is to reduce the likelihood that an employee would sue over a work-related injury or illness. Instead of seeking a settlement in court, employees can simply file a workers compensation claim. As long as their claim is valid, they should receive appropriate compensation. This streamlined process is much less expensive, smoother, and faster than filing a suit. Therefore, employees are much less likely to sue if a business has a workers compensation policy, but a policy doesn’t absolutely prevent them from suing. (Most policies have clauses that stop employees from suing if they file a claim, but policies typically don’t force employees to file a claim instead of a lawsuit). 

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How Can Businesses Get a Workers Compensation Policy?

Those that want or need a workers compensation insurance policy should contact an independent insurance agent who can help them shop for a policy on the private market. There are agents available to help throughout the state.

Meet Your Industry Specialist

Jeff Kroeger

Principal, Senior Vice President, and Head of Commercial Lines, Mr. Kroeger also manages the company's hospitality book of business and is that unit's primary producer. He is a graduate of Montclair State University and was named a 2015 Young Gun Insurance Business America.

Jeff has been providing exceptional insurance for restaurants, bars, nightclubs, and more for many years. He understands the unique challenges this industry faces and delivers the right coverage at an affordable price.

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