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What Is Workers’ Compensation Insurance?
Workers' compensation insurance gives employees medical, wage and other financial benefits if they are injured or become ill on the job. This coverage is required in most states. Workers' compensation insurance is also known as workman's comp or workers' comp insurance.
What Is Workers' Compensation?
Workers’ comp can protect your business and your employees by helping cover:
- Missed wages if an employee needs time off to recover from a work-related injury or illness.
- Medical expenses to treat an injured or ill employee.
- Vocational rehabilitation if an employee needs ongoing care to help them get back to work.
- Death benefits, like funeral costs, if a worker passes away in a work-related incident.
No matter what type of business you run, there is always a risk that an employee might sustain a workplace injury. Luckily, workers’ compensation insurance, also known as workers’ comp, can help give your employees the benefits they need if they suffer a work-related injury or illness.
How Does Workers' Compensation Work?
Workers’ compensation is a no-fault system. This means injured or ill employees can receive compensation, but they give up their right to sue their employer. Workers’ comp can help protect your business by:
- Providing disability benefits to employees that have work-related injuries or illnesses
- Limiting your business’ liability in lawsuits for work-related injuries or illnesses
- Making sure you’re following your state’s workers’ comp laws
- Helping injured employees get back to work in their old role or a new one
The laws in your state will determine the details of your workers’ comp coverage, including:
- The amount of benefits
- Types of injuries that are covered
- How benefits and care are provided
It’s important to know that some workers’ comp policies don’t provide coverage for multiple states, or for workers who travel to different states. Workers’ compensation coverage is essential for each state where your employees work.
What Does Workers' Compensation Cover?
If your employee gets injured on the job, or while acting on your behalf, workers’ comp can help by providing benefits until the injured worker can return to work. For example, if they get in an accident while driving to make a delivery to your customer, workers’ comp can help pay their medical costs.
Workers’ compensation coverage doesn’t only include workplace injuries, either. It also helps cover employee illnesses, like someone getting sick from chemicals at work.
What Is Not Covered by Workers' Comp?
Depending on your state’s workers' compensation laws, workers’ comp plans don’t usually cover an injury or illness that:
- Happens in a fight your employee caused
- Is intentionally caused by your employee
- Happens to an employee who is intoxicated
- Is emotional and has no physical trauma
- Takes place during your employee’s commute
Workers’ comp doesn’t provide coverage if you intentionally harm an employee through:
- Assault
- Battery
- Defamation
- Fraud
- A tort injury, like emotional distress
Workers’ comp will also not help protect you if an employee sues your business for:
- Gross negligence
- Malicious intent
- Discrimination
- Failure to promote
- Wrongful termination
For cases like these, employment practices liability insurance can help cover your legal costs.
Workers' Compensation Laws by State
Each state is in charge of their own workers’ compensation program. This means state laws for workers’ comp can be different depending on the location of your business.
Each state sets their own premium amounts and benefits based on their economy and the risks businesses face in that state. For example, Alaska has one of the highest average premiums in the country because they have so many lumberjacking businesses, and lumberjacking is a high-risk occupation.
Your state will also decide who sells and handles workers’ comp policies. This can be:
- State-run agencies
- Private insurance companies
- The state itself
Some states also have secondary injury funds that help cover disabled workers if they’re injured on the job again. This makes it easier for employers to hire workers who have been injured before.
For example, you run a shipping yard and hire a former nurse who hurt his back on the job years ago and had a workers’ comp claim. Their injury might make him more susceptible to reinjury, and if that happens, a secondary injury fund can help pay the costs. Without this fund, businesses may be hesitant to hire a worker like this.
Who Is Required to Carry Workers’ Compensation Insurance?
Most states require businesses to carry workers’ compensation insurance. This doesn’t include Texas, where workers’ comp is optional.
Certain businesses may also be exempt from their state’s workers’ compensation law, depending on the type of work you perform and the status of your workers.
Some examples of workers who may fall under a workers’ compensation exemption include:
- Employees who work on commission
- Certain real estate agents and insurance sales representatives
- Employees who are family members
- Part-time workers
- Volunteers
- Those who work in exchange for food
In some states, you may not need to provide workers’ comp if you have fewer than a certain number of employees.
No matter what type of business you run, workers’ comp is a great way to protect both your business and your employees. To get the coverage you need, get a quote today.
Last Updated: Aug. 1, 2023
This article provides general information, and should not be construed as specific legal, HR, financial, insurance, tax or accounting advice. As with all matters of a legal or human resources nature, you should consult with your own legal counsel and human resources professionals. The Hartford shall not be liable for any direct, indirect, special, consequential, incidental, punitive or exemplary damages in connection with the use by you or anyone of the information provided herein.
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