What is Workers’ Compensation Insurance?

Workers’ compensation insurance, also known as workers’ comp, is essential coverage for businesses with any number of employees, and it protects both the business and the employee in the event of a work-related illness, injury or even death. If an employee is injured or becomes sick due to a work-related event or circumstance, and needs medical treatment and/or cannot work, he is entitled to a percentage of his normal compensation and financial support for medical bills. Expenses like these would be paid by workers’ compensation insurance as part of a claim.

Workers’ compensation is governed by state law and is required in most states. While laws vary on the definition of a work-related injury, most include events that occur at either your workplace or off-site, like a client’s business premises. Coverage can include medical care costs, replacement of lost wages during recovery (usually a certain percentage), disability benefits, training expenses for employees who cannot return to old roles and need new ones, long-term disability benefits for employees who cannot return to the workforce at all, and funeral expenses if life is lost. 

The cost of workers’ compensation insurance is paid entirely by the employer, and it should be viewed as part of your cost of simply doing business. Without it, you could incur penalties and fines plus be liable for your employees’ medical costs and lost wages – all out of pocket. Claims against employers for a severe injury or disability could tally up to millions of dollars, bankrupting the business and its owners if they do not have the right coverage. The stakes are high.

Workers’ compensation insurance is considered no-fault insurance, meaning it pays regardless of whether the employer or employee is negligent. This reduces the costs associated with assigning blame and focuses instead on paying for medical expenses and lost income so the employee can focus on recovering and returning to work as quickly as possible. In turn, this coverage limits an employee’s right to sue the business owner for negligence and limits the risk of workplace lawsuits. 

Do I need it?

Workplace injuries and illnesses happen even in the safest workplaces. When unfortunate and unpredictable situations occur, you want the peace of mind to know your small business is protected and your employee will receive the financial support needed to recover. Consider what would happen without this coverage: in the event of a work-related incident, you would still be required to pay for your employee’s medical costs and lost wages, plus fines or penalties from your state. Costs like these can tally up to tens of millions of dollars and render your business insolvent.

Workers’ Compensation Insurance Covers:

  • Overexertion
  • Slips and falls
  • Concussions
  • Electrocution 
  • Car accidents while on the job
  • Exposure to harmful substances or chemicals
  • Contact with objects and equipment

Workers’ Compensation Insurance Does Not Cover:

  • Injuries sustained when commuting to/from work
  • Injuries due to drugs and alcohol 
  • Injuries during voluntary recreational activities 
  • Injuries that happen while committing a crime or in violation of company policies
  • Intentional injuries
  • Injuries from a fight an employee started
  • Emotional injuries not accompanied by physical trauma
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