For many businesses, daily work means functioning on a global scale with employees stationed remotely or traveling for business. Just like employees working in the United States, these employees need workers’ compensation coverage in case they’re injured while performing work duties. This is where foreign workers’ compensation insurance comes in.
How Foreign Workers’ Compensation Coverage Works
Foreign workers’ compensation insurance, also known as foreign voluntary workers’ compensation (FVWC), is a policy that protects employees of domestic companies when working abroad. As with the workers’ compensation insurance policies you purchase for domestic employees, an FVWC covers employees who get injured while performing work duties.
Should one of your overseas employees suffer a work-related injury or illness, your foreign workers’ compensation insurance policy covers the cost you’d be responsible for, such as lost wages and medical bills. These benefits, and whether or not they’re paid, is usually determined by the laws in the state where your business is located.
Who Needs Foreign Workers’ Compensation Insurance?
Just about every employer needs workers’ compensation insurance. However, business owners who send employees abroad or have an international company location may need the additional coverage provided by foreign workers’ compensation insurance. It doesn’t matter if the assignment is temporary or permanent. Insurance should be in place before the employee begins work. Coverage can be purchased for US workers sent abroad, third-country nationals, local nationals, and even independent contractors hired for an international assignment.
Employers should talk to their insurance carrier to see how far their existing workers’ compensation coverage extends. Technically, the FVWC takes a secondary position to your domestic workers’ compensation policy but extends coverage if the policy denies foreign claims, which most do for a variety of situations. You’ll need to specifically discuss an extension of coverage or a foreign workers’ compensation policy with your carrier to be fully protected.
Pro tip: Workers’ compensation insurance policies generally provide short-term coverage to employees who travel to other countries. But what’s considered “short-term” is determined by state law. Some states may cover overseas worker injuries for up to 90 days while others have a much shorter window. Your carrier should be able to tell you how your state’s workers’ comp law handles employees who travel out of the US.
What Does Foreign Workers’ Compensation Insurance Cover?
Also similar to domestic workers’ compensation insurance policies, foreign workers compensation coverage provides an employer with financial protection should an employee get injured or sick as a result of performing his job duties by paying for:
- Medical care of the injured or ill worker
- Disability payments
- Lost wages
- Rehabilitation services
- Death benefits to next of kin if the workers’ injuries prove fatal
Unlike the workers’ comp policies you buy for your stateside employees, FVWC may also cover:
- Repatriation (bringing sick or injured employees back to their home country)
- Endemic diseases
- Acts of war and terrorism
Most foreign workers’ compensation insurance policies also include employer’s liability coverage. This coverage pays for a business owner’s legal defense if a worker claims his injuries were caused by the business owner’s negligence.
What’s Not Covered
Once again, as with domestic workers’ compensation insurance policies, there are exclusions to the broad coverage. Policies typically do not protect workers who are not on duty when an injury occurs. They may also deny coverage if the employee was injured when violating safety rules, conducting horseplay, or performing illegal activities when injured. In other words, unless your employee is engaged in authorized work-related activities when hurt, they may not be covered.
Who Is Covered by Foreign Workers’ Compensation Insurance?
A variety of workers are covered by a foreign workers’ compensation insurance policy, including:
- US hires: These are US employees who are sent internationally to conduct business.
- Expatriates: US citizens who are either temporarily or permanently residing abroad who are hired by the firm to work in the country they reside in.
- Local nationals: These are local citizens hired by the US company to work in their home country. An example is a Mexican citizen who is hired to work in Mexico.
- Third-country nationals: These are citizens of one country hired to work in a different country than where they have citizenship. An example is a Guatemalan citizen hired to work in Mexico.
- Independent contractors: While most independent contractors in the US are required to carry their own insurance, companies can extend workers’ compensation to independent contractors sent abroad to work on a specific project in a specific country.
Essentially, a company should consider coverage if they have any international business dealing where they hire employees, send existing employees, or hire independent contractors to work outside of the US.
FVWC vs DBA Coverage
FVWC is similar to Defense Base Act (DBA) insurance coverage in that it provides protection against injury or illness suffered while working abroad. The difference is that DBA coverage is a type of workers’ compensation insurance protection for civilian employees who are working outside of the United States on a US military base or under a government contract for public works or national defense, as mandated by the Defense Base Act (42 U.S.C. 1651 et seq.).
Just about every company with employees needs workers’ compensation insurance. This is true domestically and internationally. If your business is doing either temporary or permanent work outside of the US, the policy you need is a foreign workers’ compensation policy. Don’t assume your domestic policy will cover workers traveling or stationed abroad.