Workers’ compensation is something the average American worker takes for granted. And why not? It has been around since the early 1900s. The benefits derived from workers’ compensation are secured through an insurance policy purchased by the employer as blanket coverage for everyone on the payroll.

As an employer, how much do you know about workers’ comp? The more you know, the better equipped you are to make wise decisions about the insurance you purchase and the company you purchase it from. We encourage you to take the time to educate yourself if your knowledge of workers’ comp is limited. Below are five things to get you started.

1. Workers’ Comp Is a State Issue

Despite what many employees believe, workers’ comp is not regulated at the federal level. It is a state issue. The federal government maintains its own workers’ comp system that applies to federal workers only. The rest of us are covered by policies purchased by our employers and regulated by our state governments.

As such, workers’ comp laws are not uniform. There are plenty of state-by-state variations. It is up to employers to know the laws in all the states in which they operate.

2. Workers’ Comp Is Not Always Mandatory

Most states require some form of workers’ comp insurance for the most risky professions. Having said that, workers’ comp insurance is not always mandatory. It may not be required at all in your state OR it might only be required for certain kinds of jobs.

3. Workers’ Comp Protects Employers Too

We typically think of workers’ comp insurance as protection just for employees. It is that, inasmuch as a worker can collect insurance benefits to pay for medical care and lost wages as the result of a workplace injury. But employers benefit from workers’ comp, too.

Back in the mid-1800s, when state employer liability laws started appearing in the states, employees were given the right to sue their employers for large sums as a result of injury. States gradually began passing workers’ comp laws to protect employers at the turn of the 20^th century.

The whole concept behind workers’ comp is to provide workers with insurance cover in exchange for their right to sue an employer. By offering their employees insurance, employers are protecting themselves against lawsuits.

4. Workers’ Comp Is Risk Driven

All forms of insurance take risk into consideration for the purposes of calculating premiums. In the arena of workers’ compensation insurance though, risk plays a more important role. In fact, you might say workers’ comp is driven by risk. The greater the risk of injury, the higher the premiums and the greater the exclusions.

5. Employers Can Shop Around

Most states requiring workers’ comp insurance allow employers to buy through either private insurance companies or government-backed risk pools. The lesson to be learned here is that employers can shop around for the best policies.

For example, Dallas-based Benefit Mall is among a small number of payroll and benefits administration companies offering a pay-as-you-go workers’ comp solution. This innovative solution offers small and medium-size businesses more affordable workers’ comp insurance without jeopardizing the value of derived benefits.

Workers’ comp is part of doing business in the modern world. It does not have to be troublesome, though. By understanding state laws and shopping around for a good policy, employers can meet their obligations without breaking the bank. And as a side note, companies should still consider purchasing insurance even if they are not required to do so. Workers’ comp is an affordable way protect against injury-related lawsuits.