Workers’ Compensation Coverage

Workers’ compensation insurance is designed to respond in the event of a work-related accident or illness.  It protects employers by limiting their liability for accidents and illness caused by work, and protects employees by providing benefits to help them recover from a work-related injury or illness. Each state has different laws governing workers’ compensation. This FAQs section is specific to Colorado. 

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What does workers’ compensation insurance cover?

Workers compensation covers accidents, injuries, illnesses and deaths that occur as a result of work. 

Medical care and treatment includes hospital bills, medications, supplies and other related costs associated with treating an injury or illness sustained in the course of work. 

Lost wages come into play if an employee must take time off work to recover from a work-related injury or illness.  Workers’ compensation in Colorado covers two-thirds of an employee’s average weekly wage.  Lost wages are typically capped at a certain amount. 

Ongoing care refers to work-related injuries or illnesses that may require multiple treatment sessions.  This can include physical therapy, multiple surgeries and more. 

Disability benefits can help cover occupational injuries or illness that leave an employee disabled, whether permanently, temporarily, totally or partially. 

Repetitive injuries are injuries that develop over time, sometimes months or years.  Poor ergonomic habits that can cause repetitive injuries like carpal tunnel syndrome are an example.

Death benefits and expenses including funeral costs and payments to an employee’s beneficiaries apply if an employee loses their life as the result of a work-related incident. 

What are some claims examples?

  • A restaurant employee burns himself while cooking. He is taken to the hospital to receive medical care and his associated medical bills are covered by workers’ compensation. 
  • A warehouse employee throws out her back while lifting heavy equipment. Her physical therapy and other treatment would be covered by workers’ compensation.  
  • An office employee trips down the stairs and breaks his wrist. X-rays, physical therapy, and his other medical costs are covered by workers compensation.
  • A roofer falls from a two story house during his work. His medical costs, treatment and portions of his lost wages are covered by workers’ compensation.   

What doesn’t workers’ compensation insurance cover?

It is important to understand what isn’t covered by workers’ compensation insurance.  For example, injuries that are the result of alcohol or illegal drug use may not be covered by workers’ compensation in Colorado. Fraudulent claims would also be likely to be denied and can result in criminal charges.  Because workers compensation insurance is administered at a state level, it is wise to review state guidelines, consult with an attorney and inquire with your workers compensation insurance agent or carrier to get a full picture of what may not be covered in full or at all. 

Do I need workers’ compensation coverage?

The majority of business do need workers’ compensation insurance. In the state of Colorado, businesses are required to have coverage if they have one or more employees.  This applies to full-time, part-time, salaried and hourly employees.  There are a few exceptions to the requirement, outlined below.

Independent contractors don’t have employees and aren’t employees.  They work on a contract rate for different businesses and do not receive employee benefits from these companies. Generally, an independent contractor works outside of the business’ control and direction regarding how the services are being performed. It is imperative to understand who qualifies as an independent contractor to ensure you are complaint with state law.

Sole proprietors and business partners are not considered employees by the state of Colorado.  As such, they are not required to be covered by workers’ compensation coverage. 

Corporate officers who own at least 10% of the business are often allowed to elect or reject workers’ compensation coverage.  There are some exceptions so it is important to work with an agent to make sure you are adhering to state law. 

While sole proprietors, business partners and corporate officers are usually not required to carry workers’ compensation coverage, it is often a wise business decision to elect coverage due to the high cost of medical care.  Even if you have health insurance, workers’ compensation can help cover lost wages and guide you through the return to work process. 

What are the penalties for failing to have workers’ compensation coverage?

The Division of Workers’ Compensation enforces compliance with Colorado workers’ compensation requirements.  This entity can issue a cease and desist order against a business that it determines lacks proper coverage, which halts all operations until proper coverage is in force.  Uninsured employers can face large fines, up to $250 per day, for the time period when coverage was not in place. 

What is the statute of limitations for workers’ compensation claims?

An injured or ill employee should file a workers’ compensation claim immediately.  The employee is required to report the injury or illness to their employer, in writing, within four working days. If the employee misses at least three days of work, the employer is required is required to file a first report of injury.  A claim can only be filed for up to two years following the diagnosis on an injury or illness.  If the injury is repetitive or ongoing in nature (like carpal tunnel syndrome) the statute of limitations begins when the employee knew or should have known there was a medical condition caused by employment.  A worker’s dependents have two years to file a claim petition for death benefits.   

How much does workers’ compensation insurance cost?

Every business is different and each policy is customized based on your industry, payrolls, location, number of employees, claims history and other factors.

Payroll is one of the main elements used to determine your workers’ compensation premium.  Your business’ total employee wages and salaries are used to help calculate your premium. 

Experience modification factor, or e-mod, is a numerical rating assigned to your policy by the National Council on Compensation Insurance (NCCI).  Your e-mod is based on your business’ accident and claims history and is used as a multiplier against the average accident rate of other companies in your same industry in Colorado.  If your e-mod is lower than the industry average (calculated as 1.00), your premium will likely be lower.  If your e-mod is higher than the industry average, it will be reflect in your premium. 

Classification codes are assigned to your industry by the NCCI and are based on exposures to injury associated with your industry.  For example, roofers will have a different classification code than restaurant workers.  Individual industries can have multiple class codes, depending on the type of work being performed.  If you industry, as a whole, suffers more worker injuries during a year, the rate for that class code will rise. 

Discounts are often offered on workers’ compensation premiums based on safety and health measures your business takes to prevent accidents.  Some discount examples are: premium size, cost containment, designated provider, performance credits, safety group program and deductible discounts. Your agent will be able to help you determine what discounts you may be eligible for and which discounts make sense for your business.  

How do I purchase workers’ compensation insurance?

Employers in Colorado have several options for purchasing workers’ compensation coverage.  You can purchase this coverage directly from Colorado’s state fund, which is administered by Pinnacol Assurance. You also have the option to purchase coverage from an authorized commercial insurance company through a licensed agent.  Larger business that have at least 300 employees or $100 million in assets can opt to self-insure, while public sector employers and professional associations may join a pool or group to obtain coverage. 

Employers’ Liability Coverage

Employers’ liability insurance protects your business if an employee sues over an occupational injury or illness. It covers legal costs in the event an employee alleges your business’ negligence caused their injury or illness. Most workers’ compensation policies automatically include employer’s liability coverage. Learn More > 

Other States Coverage

Workers’ compensation insurance requirements are different for each state. Some states require more or different coverage than others. If your business has employees that travel through or to other states for work, temporarily work outside of the business’ home state or if you have employees that regularly work in another state, you’ll need to understand your options for other states workers’ compensation coverage. Learn More >  

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