Workers’ compensation insurance provides compensation for lost wages and medical care for people who are hurt due to their jobs. Employers pay for workers’ comp coverage. Employees don’t contribute to the funds.
A workers’ compensation claim is paid if the employer or insurance company confirms that the injury or illness was work-related. If the insurer or employer rejects the workers’ comp claim, a workers’ compensation judge decides on the case.
In addition to paying for injuries and rehabilitation, workers’ compensation may compensate a family after a work-related death.
Brief Facts About Workers’ Comp
Workers’ compensation programs were established by state statute or within state constitutions beginning in 1911.
Today, each of the 50 states and Washington, D.C., have their own workers’ compensation program.
With the exceptions of Texas and Wyoming, workers’ compensation insurance coverage is mandatory in all states.
Agricultural workers, domestic employees and independent contractors are generally excluded from a workers’ comp insurance requirement.
Total workers’ comp benefits paid were $58.9 billion in 2020, according to the most recent data from the National Academy of Social Insurance. That’s a 6% decrease from 2016, when $62.7 billion was paid for workers’ comp benefits.
Who Needs Workers’ Comp Insurance?
Most states require businesses to have workers’ comp insurance, even as part of small business insurance for operations with just one employee. Other states (such as Alabama and West Virginia) do not require workers’ comp if you have fewer than five employees.
Some states have exemptions for workers’ comp requirements based on the type of work. For example, in California, you aren’t required to have workers’ comp for domestic workers employed by parents or for volunteers who work for a non-profit recreational camp or ski patrol.
Check our guide to workers’ compensation laws by state to find out what’s required where you operate.
What Does Workers’ Comp Insurance Cover?
Let’s take a closer look at the benefits covered by workers’ comp insurance.
Medical expenses including hospital visits, medications and emergency surgeries are all covered by workers’ compensation.
Lost wages are partially covered when the employee needs time away from work to recover from a work-related illness or injury.
Disability benefits are available if the injury caused a partial or permanent disability.
Ongoing care costs, such as physical therapy, are covered by workers’ compensation.
Death benefits typically include funeral costs and survivor benefits for the worker’s family.
Workers’ comp benefits are paid no matter who was at fault. And workers’ compensation laws typically prevent employees from suing their employers for a work-related injury or illness.
What Does Workers’ Compensation Insurance Not Cover?
Employees are covered for workers’ compensation regardless of the number of hours they work.
However, there are exclusions, which could result in a denied workers’ comp claim, including:
Commuting: Traveling to and from work is typically excluded from workers’ comp coverage. A person may be covered if they’re in a company vehicle or don’t have a physical office, such as a traveling salesperson.
Intoxication or substance abuse: Many states exclude workers’ compensation coverage if the injured person was intoxicated and that contributed to the injury.
Workplace fight: If an injury happens during a fight with a colleague, workers’ compensation may not cover the injuries. One exception is if the fight was about work.
Benefits of Workers’ Comp Coverage
Workers’ comp benefits both your small business and your employees. Here are a few examples of the benefits of workers’ comp coverage.
It reduces your out of pocket expenses. If a worker gets sick or ill while on the job, workers’ comp pays for their lost wages, medical expenses and other expenses, such as funeral costs. Without workers’ comp, you might have to pay out of pocket for these expenses.
It covers your employees for extended absences. An accident or illness that results in an extended absence could be financially devastating for your employees. Workers’ comp covers partial lost wages and ongoing care costs such as physical therapy.
Workers’ comp covers your employees no matter who is at fault. Mistakes happen in the workplace. Workers’ comp will cover your employees even if they’re at fault for the accident.
How To File a Claim for Workers’ Compensation
The first step in filing a workers’ comp claim is for the employee to report their work-related illness or injury to the employer.
Next, the employer should notify the insurance provider and the state workers’ compensation board if required.
In addition, the employer will need to report severe workers’ comp injuries to the Occupational Safety and Health Administration.
Workers’ comp claims can be disputed if an employer does not believe the injury or illness was caused by work. And the employee may need to appear before a workers’ compensation board to make their case for receiving workers’ compensation benefits.