2024-01-01 · business, workers

Workers’ Compensation Coverage

Overview

Workers’ compensation insurance helps pay for medical care and lost wages when employees are injured or become ill due to their work. It also provides employer liability protection in many states.

What workers’ compensation typically covers

Medical treatment: doctor visits, surgery, prescriptions, and rehab.
Lost wages: partial wage replacement during recovery.
Disability benefits: temporary or permanent disability payments.
Death benefits: funeral costs and support for dependents.

Common exclusions and limitations

Independent contractors: generally not covered unless required by law.
Off-the-job injuries: only work-related incidents are covered.
Policy violations: injuries caused by intoxication or misconduct may be excluded.
Coverage caps: benefits are often limited by state schedules.

Key cost factors

Payroll: premiums are based on payroll by job classification.
Industry risk class: higher-risk jobs have higher rates.
Claims history: frequent claims can increase premiums.
Safety programs: strong safety records can reduce costs.

How to compare policies

Verify state requirements: coverage rules vary by state and industry.
Check classification accuracy: misclassification can lead to penalties.
Review experience modification rate (EMR): a lower EMR can lower premiums.
Ask about return-to-work support: rehab programs can speed recovery.

Tips for choosing coverage

Implement safety training to reduce claims and improve EMR.
Keep payroll records updated to avoid premium surprises at audit time.
Consider employers’ liability limits if your state allows options.

Frequently asked questions

Is workers’ compensation mandatory? Most states require coverage once you have employees, but thresholds vary.

Do part-time employees need coverage? Often yes—many states count part-time staff toward coverage requirements.

What happens if I don’t have coverage? You could face fines, lawsuits, or stop-work orders depending on state law.