What Is Workers’ Compensation Insurance?
Cover your employees for workplace injuries — and protect your business
Many people spend most of their adult lives working, with workplaces as varied as a kitchen table, an office cubicle, a high-rise construction site, or working in a mine. No matter where a business’ employees work, injuries happen in every type of job.
Workers’ compensation is the insurance that covers these injuries. It helps protect the employee from workplace injuries and it also helps protect the employer from costly lawsuits. Our independent insurance agents can help you find the best workers’ compensation option for your business.
What Is Workers’ Compensation Insurance?
Workers’ compensation is a type of commercial insurance that covers employees’ workplace injuries. It also serves one other key function that helps differentiate it from other types of insurance: it prevents employees from suing their employers for workplace injuries.
Workers’ comp is fairly comprehensive insurance. In addition to paying an injured employee’s medical bills, it can also pay rehabilitation costs, lost wages, disability benefits, funeral expenses, and death benefits. But it will only pay for those extra things if they’re directly caused by the workplace injury.
Workers’ comp is also no-fault insurance. This means that it will pay a benefit regardless of who is at fault for the accident (as long as it wasn’t an intentional injury). The employer could be at fault, the employee, another employee, or somebody from the public who doesn’t even work there. Workers’ comp will pay the benefit to the injured worker regardless.
Is Workers’ Compensation Mandatory?
It’s mandatory in most states for certain types and sizes of businesses. Workers’ comp, as with other types of insurance, is regulated at the state level. Each state has its own workers’ comp department and its own laws that regulate and govern it, so be sure to check your own state’s workers’ comp laws to see where your business fits in.
Most states don’t require sole proprietors or partnerships to have workers’ comp if they don’t have any employees. Once a business hires employees, typically they’ll be required to buy workers’ comp.
Each state has slightly different requirements for the number of employees that make workers’ compensation required. Typically, the number is between one and five employees.
Independent contractors are typically not considered employees — unless they don’t have their own workers’ comp insurance. If there is a workplace injury with a contractor or subcontractor who doesn’t have their own workers’ comp insurance, the client and/or general contractor could be liable for their workplace injuries.
What Does Workers’ Comp Cover?
Workers’ compensation covers nearly all workplace injuries. The definition is fairly broad, because most workers’ comp policies have wording that defines what’s covered as “injuries sustained during the course and scope of employment.”
There could be some gray areas in what that means exactly. For example, if you slip and fall in the parking lot on your way into work, that could be considered a workers’ comp claim, though some states have stricter guidelines than others.
Workers’ comp claims must also be accidental. Each insurance company has the right to investigate a workers’ comp claim to determine if there was any malintention involved.
Workers’ comp benefits
If there is a workers’ comp claim, the insurance claim will pay all related medical costs related to the injury, which could include rehabilitation expenses. It will also pay for lost wages while the employee is unable to work, which in cases of serious injuries could mean lost wages are paid out until retirement age.
The exact amount that’s paid in lost wages will depend on if the disability is total or partial and permanent or temporary.
In situations where the workplace injury leads to death, workers’ comp will pay for funeral and burial expenses, and may also pay a death benefit related to lost wages, making it similar in some ways to an employer-based life insurance policy.