Workers compensation insurance explained: coverage for on-the-job injuries

The short version

• Workers compensation covers medical costs and a portion of lost wages for job related injuries and illnesses.
• Most states require it once you have employees, though the rules vary by state.
• It generally applies regardless of who was at fault for the injury.
• In return, it usually limits an employee ability to sue the employer over the injury.

Workers compensation, often called workers comp, is a coverage that pays benefits to employees who are hurt on the job or develop a work related illness. It typically covers medical treatment, a share of lost income during recovery, and benefits related to lasting injury.

It works on a no fault basis. An injured employee generally receives benefits whether or not the employer or the worker was careless. In exchange, workers comp is usually the exclusive remedy, meaning the employee gives up most rights to sue the employer over the injury. This trade off is the core idea behind the system.

In short: workers compensation pays medical and wage benefits for job related injuries on a no fault basis, and generally shields the employer from injury lawsuits.

Benefits are set by each state, but most programs share a similar structure.

• Medical care. Treatment for a work related injury or illness, from an emergency visit to ongoing care.
• Lost wages. A portion of income while an employee cannot work during recovery.
• Disability benefits. Payments related to a lasting partial or total disability caused by the injury.
• Rehabilitation. Support to help an employee recover and return to work.
• Death benefits. Support for dependents if a work related injury or illness is fatal.

Because the details depend on your state and your payroll, please contact us to discuss your options.

In short: workers comp typically pays for medical care, part of lost wages, disability, rehabilitation, and death benefits for dependents.

Most states require workers compensation as soon as a business has employees, though the threshold and exemptions differ.

• State law. The number of employees that triggers the requirement, and which workers are exempt, varies from state to state.
• Employee status. Coverage generally applies to employees. Independent contractors are treated differently, and misclassifying workers can create serious problems.
• Penalties for going without. Operating without required coverage can lead to fines and personal liability for the costs of an injury.

The U.S. Department of Labor notes that most workers compensation programs are administered at the state level, so the rules that apply to you depend on where your employees work. To confirm what your business needs, please contact us to discuss your options.

In short: most states require workers comp once you have employees, the rules vary by state, and going without required coverage carries real penalties.

Workers compensation sits alongside your other business policies and does not replace them.

• It is separate from general liability. General liability covers injury to outsiders like customers, while workers comp covers your own employees.
• It often stands apart from a business owners policy. A business owners policy usually bundles property and general liability, but workers comp is typically bought separately.
• It pairs with employer liability coverage. Many workers comp policies include employer liability, which addresses certain injury claims that fall outside the no fault system.

To place workers comp correctly next to your other coverages, please contact us to discuss your options.

In short: workers comp covers employees while general liability covers outsiders, and it is usually purchased separately from a business owners policy.