New Jersey workers’ compensation insurance

Every business that has employees in New Jersey is required to carry workers’ compensation insurance.

State law provides some exceptions for employers covered by federal programs and members of limited liability corporations (LLCs), partners in partnerships, and sole proprietors who don’t employ other people.

A self-employed person isn't required to buy workers’ comp coverage. New Jersey requirements do not mandate this coverage for sole proprietors with no employees, freelancers, or independent contractors.

However, you should consider buying this coverage even if it's not required. Your health insurance might not cover workplace injuries, which would leave you responsible for medical bills. On top of that, you would miss out on wage replacement benefits that can help keep your business running while you recover.

Part-time and seasonal employees must be covered by NJ workers’ compensation insurance if they are paid wages or salaries and have taxes deducted. Contractors, interns, and volunteers are exempt from coverage requirements.

Additionally, here's what your workers' comp policy won't cover:

• Injuries caused by intoxication, drugs, or company policy violations
• Injuries claimed after a firing or layoff
• Wages for a replacement worker
• Occupational Safety and Health Administration (OSHA) fines

Insurance providers use a specific formula for calculating workers' comp premiums:

To save money on workers' comp insurance, it's important to make sure you classify your employees correctly. Employees with desk jobs or other jobs with a low risk of injury cost less to insure. This also helps you avoid misclassification fines.

In some cases, small business owners can choose to buy pay-as-you-go workers' compensation. This type of workers' comp policy has a low upfront premium, and lets you make payments based on your actual payroll instead of estimated payroll. It's useful for businesses that hire seasonal help or have fluctuating numbers of employees.

A ghost policy is a cheap option in some states, but a workers' comp policy in name only. It provides no protection, but can fulfill contractual requirements for a workers' comp certificate at a reduced price.

Finally, a documented safety program can help lower workers' comp costs. A safer workplace means fewer accidents, which helps keep your premium low.

New Jersey workers’ compensation insurance offers advantages to both employers and employees. It provides medical benefits covering the cost of treatment for injured workers. Workers' comp also covers 70% of their average weekly wage during recovery if the worker is disabled for more than seven days.

Policies usually include employer's liability insurance, which can help cover legal expenses if an employee blames their employer for an injury. However, the exclusive remedy provision in most workers' comp policies prohibits an employee from suing their employer if they accept workers' comp benefits.

Workers' compensation benefits in New Jersey include:

• Medical benefits that cover all medical treatment for the injury
• Temporary disability benefits to replace lost wages
• Permanent partial disability benefits
• Permanent total disability benefits
• Death benefits, including burial expenses, if the employee dies as a result of a work-related injury

There are specific guidelines for when an injury must be covered under a workers’ compensation claim. New Jersey law indicates that the requirements are as follows:

• The employee’s injury took place while performing a job.
• The employee’s injury was too serious to be treated with basic first aid.
• The employee receives a standard paycheck that has taxes deducted each pay period.

Find more information in the New Jersey Department of Labor and Workforce Development's Workers' Compensation Frequently Asked Questions (FAQ).

The New Jersey Division of Workers' Compensation regulates and enforces workers’ compensation. Failure to carry appropriate workers’ comp insurance for your business can result in penalties that range from administrative fines to criminal charges as severe as fourth-degree felonies.

The financial penalties are up to $5,000 for the first 20 days of noncompliance and up to $5,000 for each 10-day period thereafter. These penalties are delivered in the form of liens against the employer, and prosecution is through seizure of property.

It can be beneficial to both employees and business owners to reach a workers’ comp settlement. The State of New Jersey has two types of settlement arrangements:

Section 20 settlement. If the insurance company denied all or part of a workers' compensation claim, the employee and the insurance company could still agree to a full and final settlement as a lump sum. That would mean that the employee gives up all rights to future formal claims related to that injury, including future medical care.

Section 22 settlement. In this situation, the insurance company agrees to pay permanent disability benefits in installments. This would not require the employee to give up rights to future medical care, and if the condition worsens, the workers' compensation case could be reopened and additional benefits requested. This additional claim can be made for two years from the final payment of the original settlement.

Several factors affect the outcome of a workers’ compensation settlement. New Jersey claims can be contingent upon the severity of the injury, needs for ongoing medical care, pre-injury wages, ability to return to work, and other pieces of evidence presented during the evaluation.

An injured employee must file a workers' comp claim within a specific statute of limitations. New Jersey’s time limit for filing a claim is two years from the date of injury or the date of the last payment of compensation, whichever is later.

If the injury is an ongoing occupational illness, the claim must be filed within two years of the date the worker became aware of the condition.

If you're ready to buy a workers' compensation policy, start a free application with Insureon to compare quotes from top-rated insurance carriers. A licensed insurance agent will help answer your questions and explain your coverage options. Once you find the right policy, you can usually begin coverage and get your certificate of insurance in less than 24 hours.