Workers Comp vs Occupational Accident Insurance Compared

American 1099 independent contract workers are entitled to safe worksites and protection through their employers in the form of workers’ compensation. In some cases, workers’ compensation doesn’t protect 1099 independent contract workers at the level a niche job with unique risks requires. In these cases, some employers turn to occupational accident insurance to maintain liability protection.

Occupational accident insurance is a complex policy requiring an experienced broker, agent, and/or underwriter to organize. This is where Novatae comes in. As a wholesale insurance provider, we work with brokers and agents to provide bespoke policies covering a wide range of individual niches within the working world.

In this guide, we’ll discuss occupation accident insurance vs. workers’ compensation. Topics covered include the pros and cons of each, major differences between the two, coverage variances, eligibility requirements, and which is preferred.

Understanding Workers Comp

Workers’ compensation is a broad insurance program, often state-administered. It supports 1099 independent contract workers through a myriad of expense coverages for things like lost wages, medical expenses, and legal expenses if an injury happens at work or on work property.

Workers’ compensation covers a wide range of medical expenses, including those related to injury or illness. Sometimes workers’ compensation claims are made years after the event if the injury leads to late-onset pain or illness.

Workers' Comp Pros

The blanket policies offered by workers’ compensation have pros and cons. Some of the common advantages include:

• Employer Legal Coverage: Workers' compensation offerings protect employers against lawsuits from injured 1099 independent contract workers. This limits costs to the company in terms of lawyer bills or other legal fees related to an on-site injury or illness.
• Comprehensive Coverage: Workers’ compensation plans include a large spread of coverage possibilities, from work-related injuries to long-term work-induced illnesses to lost wages due to illness or injury caused on the job.
• No-Fault System: Workers’ compensation is a no-fault system. The policy protects the employee who was injured or fell ill, despite whose fault it was.
• Recovery Support: One of the main purposes of workers’ compensation is to get 1099 independent contract workers healed and back to work. It includes financial support for rehabilitation and even retraining when necessary.

Workers’ Comp Cons

Workers’ compensation also includes some pitfalls. The most common cons associated with a standard workers’ compensation policy include:

• Employer Costs: Workers’ compensation insurance isn’t covered by the state. Employers pay the premiums required by the state to cover the cost of protecting their 1099 independent contract workers. This is problematic in unique job types where risks run high. Premiums take shape based on past claims, payroll, and the industry.
• Exclusions: While workers’ compensation is viewed as something of a broad-range blanket policy, there are some exclusions. Not all injuries or work-related illnesses are covered on-site. Any injury caused while violating a workplace policy, for example, is exempt from coverage.
• Abuse Potential: The cost to employers and insurers is possible with workers’ compensation in the event of fraud. Abusing the workers’ comp system through prolonged absences outside of the recovery time further disrupts this system.

Understanding Occupational Accident Insurance

Occupation accident insurance (OAI) differs from standard workers’ compensation policies. It offers protection to 1099 independent contract workers and employers in terms of financial safety in the event of an on-the-job accident or injury.

OAI is complex in the type of coverage, amount of coverage, and even type of risks covered in the workplace. Where workers’ compensation protects against a broad blanket or general risks with a set level of deductibles and coverage, OAI offers some flexibility and customization.

1099 independent contract workers and employers are often able to select deductibles and coverage based on options outlined in the policy. These amounts must be calculated carefully, as the plan may not protect against medical expenses that fall outside of the coverage limits chosen. It helps to work with an experienced broker when choosing the coverage level for a client.

Occupational Accident Insurance Pros

Like workers comp’, OAI has pros and cons to weigh. Here are some of the advantages:

• Coverage Flexibility: OAI offers some flexibility in coverage and premiums. Employers can select the deductibles, limits of coverage, and add-on protection to fit their individual business needs and budget.
• Cost Efficiency: For employers, comparing occupational accident insurance vs. workers' compensation, OAI is the more cost-efficient option in certain cases. Because employers can tailor it to suit the risks and requirements of the industry, there are fewer additional expenses to contend with.
• Independent Contractor Protection: OAI offers coverage for independent contractors, whereas workers’ compensation does not. This is beneficial to contractors and the employers contracting them as it offers much-needed protection to both.

Occupational Accident Insurance Cons

There are also some downsides to occupational accident insurance vs. workers’ compensation, including:

• Lack of Legal Immunity: Employers don’t face the same legal immunity they do with workers’ compensation through occupational accident insurance. Instead, employers may be liable if sued by injured workers, which could lead to substantial settlements or legal costs. To offset this potential legal responsibility, the employer should consider Contingent Liability coverage. This coverage can protect the employer should a 1099 independent contract worker initiate an action claiming to be an employee rather than an independent contract worker and demand workers' compensation benefits. For eligible claims, the policy will cover legal costs and, should the claim be granted, will compensate the employer for benefit costs beyond those provided by the occupational accident policy up to the policy limits.
• Coverage Gaps: Although customizable, OAI doesn’t cover everything in a neat little package the way workers’ compensation sometimes does. There are gaps where certain risks may not be protected, depending on the structure of the policy.

Differences Between Workers Comp and Occupational Accident Insurance

Occupational accident insurance and workers’ compensation provide very different coverage, costs, and even structuring. Let’s break down both policy types to examine how they cover 1099 independent contract workers and employers more closely.

Benefits Comparison:

Workers’ compensation protects against injury or illness related to on-the-job duties. The program supplies full coverage, including:

• Medical expenses: If an individual is injured on the job or becomes ill due to exposure to toxins on a job site, medical expenses are paid through workers’ compensation.
• Therapy expenses: Workers’ compensation aims to get 1099 independent contract workers healed and back to work quickly. It covers many forms of therapy to return 1099 independent contract workers to their full potential, including retraining.
• Wage protection: A portion of the employee’s salary is paid during time off if a job can no longer be done due to workplace injury/illness.
• Survivor benefits: In the event of a fatal incident in the workplace, survivor benefits provide support to family members of the deceased to cover funeral arrangements.

In comparison, occupational accident insurance provides a more flexible coverage opportunity. In terms of benefits, employers may tailor coverage to meet individual company needs. OAI includes medical expenses and wage protection to some extent, but this coverage depends on the plan selected by the employer.

Some options for benefits outside of medical and wage include:

• Accidental death benefit
• Accidental dismemberment benefit
• Survivors benefit
• Burial benefit
• Accidental medical expense
• Accidental dental expense
• Temporary total disability benefit
• Permanent total disability benefit
• Non-occupational accident benefit
• Hernia and hemorrhoid benefit
• Chiropractic benefit
• Passenger accident benefit

The overall extent and limits of this coverage are flexible and customizable by employers, making it easy to reduce insurance costs.

Coverage Variances:

Workers’ compensation applies to protect employers and 1099 independent contract workers at a broad level. Occupational accident insurance works granularly to implement individual coverage responses for particular risks and job types.

While both policy types offer protection against injury and illness in the workplace, occupational accident insurance allows non-standard industries to protect 1099 independent contract workers with customized policies.

Eligibility Distinctions:

To qualify for workers’ compensation, 1099 independent contract workers must be:

• Employed by a company.
• The company was offering workers’ compensation.
• The claim must involve an injury or illness that took place at work.

Workers’ compensation is standardized and applies to all U.S. businesses apart from those located in Texas. Texas doesn’t require businesses to offer workers’ compensation insurance, and it is the state that most widely uses OAI. Occupational accident insurance has more flexibility in eligibility.

OIA may be sponsored by the employer for full-time or part-time independent contract workers. Businesses may use this flexibility to adapt coverage to protect at different levels across the company.

How Accepted is Occupational Accident Insurance?

In the past, workers’ compensation was the only on-the-job insurance protection product accepted as “proof of insurance” by the government. Now, the insurance world has expanded, and occupational accident insurance is more widely accepted in field-based businesses and trades where higher workplace injury rates increase workers’ compensation premiums.

Having the right workers’ protection policy in place is beneficial to 1099 independent contract workers and employers.

Why Occ Acc is Preferred by Independent Contractors (1099s) and Field-Baseed Businesses

Occ Acc is preferred by employers in these job types and by independent contractors because it allows for more advanced customization.

Contracted 1099 independent contract workers

For 1099 independent contract workers, having occupational accident insurance offers a level of protection they otherwise wouldn’t have. On a dangerous worksite, in shipbuilding, or at a construction yard, a contracted employer isn’t protected by the blanket of workers’ compensation. If something happens on the job, they will be at risk of expenses, including:

• Medical
• Legal
• Lost wages
• Therapy

OAI can be a solution where workers’ compensation isn’t available.

Jobs Where OAI is Common

Some jobs where occupational accident insurance might be more commonly used include:

• Trucking and transportation
• Construction
• Landscaping
• Industrial
• Big machine autobody technician jobs
• Mining
• Oil refineries

Occupational accident insurance is typically better for these industries because of the high risks associated with them. Workers’ compensation premiums increase with risk level and number of claims made by the company applying for coverage. These industries may experience higher risks than a retail store or bank, for example. Employers pay less for more precise coverage.

Emerging Classes

The employment landscape is constantly changing, and emerging classes don’t always fit the workers’ compensation mold. Some new job categories, including jobs that require movement or traveling like golf caddies, fitness instructors, and realtors, require unique protection against potential on-the-job injury.

Choosing the Right Coverage for Your Clients

Choosing the right coverage for your clients is important as an insurance retailer. Access to unique products like customizable OAIs opens the door to new clients across various industries.

When determining insurance type, consider:

• Industry
• Level of risk
• Past claims
• Types of protection available through workers’ compensation
• Eligibility for workers’ compensation

If you find your client could benefit from a more bespoke insurance product, a wholesale insurer like Novatae can help.

Novatae is a wholesale insurance company specializing in products for unique and complex risks. We provide products for companies across a variety of industries, including niche job types that don’t always fit the workers’ compensation mold.

Novatae works with a large connection of insurance providers and writers, ensuring our partners receive the right product for their clients. To learn more, contact us today.

This article is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.