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Workers' Comp

What is Workers' Compensation Insurance?

In 2019, there were 2.8 million nonfatal workplace injuries reported in the US according to the Bureau of Labor Statistics. That equates to a workplace injury being reported every eleven seconds.

Workers’ comp insurance provides benefits if your employee has a work-related injury or illness.

It’s so important that nearly all 50 states in the U.S. require businesses to provide workers’ comp coverage.

In this article, we’ve explored the key elements of workers' comp:

●     What is workers’ comp coverage?
●     What does the insurance cover?
●     How does it work?
●     Benefits of workers’ comp coverage?
●     Who pays workers’ comp insurance premiums?

We’ve also explained the who, why, and what for employees and employers. 

Without further delay, let’s jump in!

What is Workers' Compensation Insurance?

Workers' comp coverage is a form of insurance designed to provide compensation for employees who become disabled or injured in the course of their employment.

It's also known as "workman's compensation" or "workers’ comp."

The employee’s medical fees and wage replacement, or other related losses due to a workplace injury are covered by the employer and in turn the employee waives their legal right to sue the employer for negligence or make claims on the grounds of negligence which could potentially result in higher damages — also called a "compensation bargain."

Workers’ comp serves both parties by limiting and protecting them from legal recourse due to work hazards.

What Does Workers' Compensation Insurance Cover?

Plans generally vary from state to state. However, here are the basics things covered under workers’ comp insurance:

  • Medical treatment for the injured employee
  • Temporary disability (as much as 2/3 of average weekly wage)
  • Total disability (usually paid in a lump sum)
  • Permanent impairment (such as a loss of finger)
  • Death benefits (usually paid to the employee’s dependents or survivors)
  • Employers liability 

Workers' Comp Infographic

How Does Workers' Compensation Work?

The workers’ comp process begins immediately after an employer files a workers’ comp claim. 

The process varies for each state, but most employers guide the employee through the claims process once the need arises. 

Here’s a breakdown of what happens when an employee initiates the workers’ comp claims process:

1. Report the Injury to the Employer
Typically, the employee is required to report the work-related injury to the employer first, as soon as it occurs, to avoid compensation denial. But they can seek help or care immediately in case of emergency.

The timeframe for reporting and initiating a claim varies in each state—for instance, employees in New York have up to 30 days after the injury.

Some states require three days; others allow employees to report occupational injuries and illnesses for up to a year or more.

Knowing the state's requirements and processes will help the employee understand the system and meet any claim timelines.

2. Seek Medical Attention
Again, if it’s an emergency, seek care immediately — don’t sleep on it! 

If the injury takes time to develop, employees should report it as soon as it's discovered.

Depending on the insurer and the state, some policies may cover only visits with select approved health care providers, so employees should be sure to check the employer’s requirements before initiating a visit to the doctor.
If the doctor knows that it’s a work-related incident, a medical report will be sent directly to the employer’s insurance company or provided to the employee.

Most employees are required to pay for their medical expenses upfront and are later reimbursed by the insurance company.

The insurance company may choose to pay the health care provider directly in certain situations, but the employee should be ready to foot the bill at their initial doctor's visit.

3. File a Claim  
Report A Claim

This is where the employer files a claim.

At this stage, the employer provides the employee with a state-mandated form to provide details and documentation of the event that caused the injury.

After processing the claims, the employee is entitled to payment disbursements for all related medical fees and other benefits. 

Besides payments for medical expenses, workers’ comp also provides the injured employee with ⅔ of lost weekly wages for being out of work. 

Either way, involving an attorney in the negotiation is a step in the right direction to cover future medical costs related to this incident. 

Employers can dispute claims if the illness or injury was not work-related. The dispute process varies in each state, and it likely requires that the dispute is to be filed with the workers’ comp agency or be presented to an advisory panel for a decision. 

Once a claim is settled, the employee ceases to have rights to coverage for future medical bills.

Benefits of Workers’ Compensation Coverage?

Here are some ways workers’ comp benefits both employer and employee:

1. Workers’ Compensation Protects the Employer’s Business
Think of everything that could go wrong when an injured employee files a lawsuit. The business could end up paying unreasonable sums for damages.
Workers’ comp coverage helps the employer pay for the partial lost wages and medical bills of the injured worker — in most cases, the actual amount they will pay out-of-pocket without coverage.
In injuries resulting in the death of an employee, most workers’ comp policies also offer a death benefit. This helps to lessen the financial burden of footing the funeral expenses of the employee.
Most states also include an employer's liability insurance as part of the workers' comp policy. Policies with this benefit help the employer cover legal fees, settlements, and judgments if the employee files a lawsuit over their injuries.

2. Workers’ Compensation Insurance Protects the Employee
A work-related illness or injury could lead to devastating consequences for an employee. In some cases, it could even be life-altering.
Workers’ comp insurance often provides financial benefits to employees in the event of work-related injuries or illnesses, to include a portion of their lost wages.
Workers’ comp insurance allows injured employers to receive treatment and care and then resume work without significant financial strain.
The coverage typically provides access to compensation for permanent injuries, vocational rehabilitation, and survivors’ benefits.

Note: Workers' comp is no-fault coverage, so employees are paid even if they are responsible for the sustained injury.

Who Pays Workers’ Compensation Insurance Premiums?

The employer pays for workers’ comp insurance premiums.

The specific price is determined by many factors, including;
  • The industry involved (some industries are more work-hazard prone)
  • The type of work carried out by the employees do
  • The state in question
  • The number of employees in the company and their annual payroll
  • The claims history of the employer

High-risk companies such as manufacturing and production companies usually pay significantly higher premiums than safer companies.


This review is only meant to touch on the basics of workers’ comp.

Remember: it is there to protect both the employer and the employee from unforeseen work-related injuries, lawsuits, and unnecessary costs.

If you’d like to learn more about this type of insurance for small businesses, check out some of our other guides and videos. If you’re shopping for small business workers’ comp coverage, you can buy online today — no phone calls or paperwork required! 

Get started today!

This workers' compensation blog is not intended to be exhaustive, provide insurance counseling, nor should it be construed as legal advice. Readers should contact their insurance professional or an attorney for advice. 



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