Home » Everything You Need to Know About Workers’ Compensation Insurance to Get Started

Everything You Need to Know About Workers’ Compensation Insurance to Get Started

Workers’ insurance refers to a type of liability insurance that offers financial benefits to workers who suffer illness and injuries while at the workplace. In many states, businesses that have employed workers are required to have valid workers’ compensation insurance for every employee.

On accepting the workers’ compensation benefits, the injured employee agrees not to sue your company for the illness or injury. Workers’ compensation insurance will pay the benefits regardless of whether the employee’s or employer’s fault caused the damage.

Examples of situations where workers’ compensation insurance could come into your rescue include:

  • A worker is lifting boxes in the warehouse and injures his back. Workers’ compensation insurance will cover the medication bills, doctor’s fees, and physical therapy.
  • A worker has been typing for a long time and suffers repetitive stress in her hands. The workers’ compensation insurance will cover all her medical bills and physical therapy fees.
  • An employee hit another car when making deliveries using his personal vehicle. He ends up injured and is unable to continue working. Workers’ compensation will come in and pay medical bills as well as pay for lost wages partially.
  • An employee mopping floors trips on the slippery floor and falls, and is unable to work for several days. This type of insurance will cater to medical bills and pay part of the employee’s lost wages.

What do Workers’ Compensation Insurance Cover

Before you visit various insurance companies for a workers compensation insurance quote, it is essential to know what workers’ compensation insurance covers.

This type of insurance covers workers who suffer illness or injury at the place of work. An employee is a person who provides services at the direction of the employer. This can include workers who aren’t US citizens and also minors.

A work-related injury refers to an injury that a worker gets when carrying out their duties. This includes an injury that your employee gets when working and also injuries that happen during work-related travels. But this does not include driving to and from work.

Other types of work-related injuries covered by this type of insurance include natural disasters and violence.

The states regulate the kind of injuries or illness covered by workers’ compensation insurance. But there are some injuries and diseases that are not defined by the states. In such a case, an employee can still sue your company. Workers’ compensation insurance will pay the legal fees and damages caused by the injuries and illnesses not defined by states.

This is what to expect in case of:


When one of your employees is injured at work, workers’ compensation will cover the employee’s medical bills, physical therapy costs, and a part of lost income when they aren’t able to work.

The wage replacement given by the insurance depends on whether the employee has suffered partial or total impairment. A lot of state laws require that the benefits be paid for the duration when employees aren’t able to work.


If an employee dies due to work-related causes, workers’ compensation will cater to funeral costs and pay death benefits to the surviving family members such as children and the spouse.

The amount given to surviving relatives is based on the employee’s weekly income – usually a two-thirds but vary depending on the state.

How Much You Need to Pay for Workers’ Compensation Insurance?

Workers’ compensation insurance pricing depends on many factors, including:

  • Number of employees
  • Where the business is located
  • Nature of business
  • Claims history

For many large companies, insurance companies apply the experience rating to adjust the premiums. The experience rating is based on the claims history of your business compared to other businesses in the same industry. If your company has a higher experience rating, you will pay a higher workers’ compensation premiums.

The experience rating is based more on the frequency of claims as opposed to the severity of claims. Thus, a company with many smaller claims will be rated higher than a company with few large claims.

Insurance companies view businesses with many small claims as an indication that they have high chances of having large claims in the future, and so will charge them higher premiums.

It is therefore important to create a safe environment for your workers so you can control your workers’ compensation costs.

When is it Necessary to Buy Workers’ Compensation Insurance

Regulations regarding when a workers’ compensation insurance is required vary for each state. Most states will not require you to have a workers’ compensation insurance until you employ workers who are not shareholders in your business.

In some states, immediate family members like the spouse, child, or parent are not seen as employees in the workers’ compensation requirement.

Other states allow business owners to include themselves in the cover if they want.

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