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Workers' Compensation Insurance Complete Guide

No matter what type of business you run, your employees can get hurt. 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.Workers’ comp can protect your business and your employees by helping cover:

  • Missed wages if your injured or ill worker needs time off from work while they recover.
  • Medical expenses to treat your injured or ill employee.
  • Vocational rehabilitation if your worker 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.

What Is Workers' Compensation Insurance?

Workers’ compensation insurance is a type of business insurance that provides benefits to employees who suffer work-related injuries or illnesses. Specifically, this insurance helps pay for medical care, wages from lost work time and more.

Workers’ compensation insurance benefits can vary by state. Workers’ compensation coverage helps protect a business in three ways. These include: covering employee illnesses and workplace injuries, protecting the business from lawsuits, keeping the business compliant with state regulations.

Workers' comp 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 the business.

Each state sets their premium amounts and benefits based on their economy and the risks their businesses face. 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.

States 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, a medical facility may 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.

California law says every person and apprentice working for an employer must have workers’ comp. This includes employees with oral and written agreements. It also includes lawfully or unlawfully employed workers.

What types of injuries are covered by workers' comp?

If an employee gets injured on the job, or while acting on behalf of the business, workers’ comp can help pay their medical costs.

Workers’ comp can also help cover injuries from work-related:

  • Violence
  • Terrorism
  • Natural disasters

About 30% of workers’ comp cases are sprains and strains. These usually happen while lifting something heavy. In most cases, these injuries take about 12 days before the employee can return to work. Jobs and activities that see the most sprains and strains include:

  • Labor
  • Freight
  • Stock
  • Material moving
  • Nursing assistants

The second highest percentage of workers’ comp cases are for falls, slips and trips. These make up 27% of claims.

Workers’ comp doesn’t only include workplace injuries, either. It also helps cover employee illnesses, like someone getting sick from chemicals at work.

What doesn't workers' comp cover?

Depending on state laws, workers’ comp plans don’t usually cover an injury or illness that:

  • Happens in a fight the employee caused
  • Is intentionally caused by the employee
  • Happens to an employee who is intoxicated
  • Is emotional and has no physical trauma
  • Takes place during the employee’s commute

Workers’ comp will also not help protect businesses if an employee sues the business for:

  • Gross negligence
  • Malicious intent
  • Discrimination
  • Failure to promote
  • Wrongful termination

For cases like these, employment practices liability insurance (EPLI) can help cover legal costs.

How does workers' comp protect a business?

Workers’ comp can help protect businesses by:

  • Providing benefits to employees that have work-related injuries or illnesses
  • Limiting business’ liability in lawsuits for work-related injuries or illnesses
  • Making sure the business is following 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 that travel to different states. Workers’ compensation coverage is essential for each state where employees work.

Will workers' comp cover the business owners if an employee sues for getting hurt on the job?

Workers’ compensation is a no-fault system, which means injured or ill employees can receive compensation, but they give up their right to sue their employer. However, there are exceptions. Workers’ comp doesn’t provide coverage if an owner intentionally harms an employee through:

  • Assault
  • Battery
  • Defamation
  • Fraud
  • A tort injury, like emotional distress

Who is required to carry workers' comp?

Most states require businesses to carry workers’ compensation insurance.

In some states, a business may not need to provide workers’ comp if they have fewer than a certain number of employees.

No matter what type of business, workers’ comp is a great way to protect both the business and employees.