What Does Workers' Comp Insurance Cover?

Workers' comp insurance, also called workers' compensation or workman's comp, can cover medical care and part of an employee's lost wages when they're hurt or get sick because of their job. Most states require it once a business has employees, and the rules vary by state. Tivly matches small businesses with one of 450+ partners that offer workers' compensation insurance.

What Is Workers' Compensation Insurance?

Workers' compensation insurance can cover employees who get hurt or sick because of their job. It's also called workers' comp, work comp or workman's comp. It can cover medical care and part of an employee's lost wages while they recover.

In most states, workers' comp is the main way an injured employee is compensated for a work injury, which usually limits lawsuits against the employer. Your state's department of insurance or workers' comp board sets the details.

How Does Workers' Comp Work?

1. An employee is hurt or gets sick because of their work and reports it to the employer.
2. The employer reports the claim to their workers' comp insurer, usually within a deadline set by the state.
3. The insurer reviews the claim and confirms the injury is work-related.
4. If it's approved, the policy can cover medical care and part of the employee's wages, at benefit levels set by state law.
5. The employee returns to work when cleared. In most states, accepting workers' comp benefits means the employee can't also sue the employer for the same injury.

What Does Workers' Comp Cover?

Workers' comp can cover:

1. Injuries that happen while doing the job
2. Repetitive stress injuries, like carpal tunnel
3. Work-related illness, like breathing problems from exposure on the job
4. Medical bills and rehab costs
5. Part of an employee's lost wages while they can't work
6. Disability benefits after a work injury
7. Death benefits for the family of a worker killed on the job

What Isn't Covered by Workers' Compensation?

Workers' comp usually doesn't cover:

1. Injuries that happen off the job, like during a commute
2. Injuries caused by alcohol or drug use
3. Injuries from fights the employee started or from breaking company rules
4. Self-inflicted injuries
5. Independent contractors, in most cases

Coverage for employees who work or travel in other states varies. A licensed partner can explain how your policy handles out-of-state work.

What Does a Workers' Comp Claim Look Like?

Example #1: A grocery clerk climbs a ladder to stock a high shelf. They fall and break their arm. Workers' comp can help cover their treatment and part of their lost wages.

Example #2: A warehouse worker hurts their back lifting heavy boxes. They miss three weeks of work for physical therapy. Workers' comp can help cover the therapy and part of their pay while they recover.

Example #3: A cook burns their hand on a fryer during a busy shift. Workers' comp can help cover the ER visit, follow-up care, and time off work.

Workers' Compensation Insurance for Small Businesses

For most small businesses, workers' comp becomes a requirement as soon as they hire their first employees. Premiums are based on payroll and job risk, so a small office team and a small roofing crew can pay very different amounts. Some partners offer pay-as-you-go billing that matches premiums to each payroll period instead of one upfront payment.

Clients and general contractors often ask for proof of workers' comp before work starts, usually as a certificate of insurance. Workers' comp is one piece of small business insurance, and many owners carry it with general liability.

Is Workers' Comp Required in My State?

Workers' comp requirements vary by state. Most states require it once you hire employees. Some start at one employee, others at three, four or five, and the rules can differ by industry. A few states require employers to buy it through a state-run fund, and at least one lets most private employers choose not to carry it. Even where it's optional, clients and contracts often ask for proof of coverage.

Skipping required coverage can lead to fines, and in some states, criminal charges. Check with your state's workers' comp board for the exact rules, or see our state pages:

1. California
2. Florida
3. Georgia
4. New Jersey
5. New York
6. Texas

Do Sole Proprietors and 1099 Contractors Need Workers' Comp?

Depending on your state, these may not be required to carry it:

1. Sole proprietors with no employees
2. Some partners and LLC members
3. Businesses that only hire independent (1099) contractors

Two things to know. First, if a worker is treated as an employee under state rules, a 1099 label doesn't change that, and misclassified workers may need coverage. Second, some owners with no employees buy a ghost policy: a minimum workers' comp policy that covers no one but gives them proof of coverage that clients ask for. A ghost policy usually doesn't cover the owner's own injuries. Contractors can also see independent contractor insurance.

What Other Coverage Do Employers Carry?

Many small businesses pair workers' comp with:

1. General liability insurance: can cover third-party injuries and damage to other people's property.
2. Professional liability insurance: can cover claims that your work or advice caused a financial loss.
3. Business owner's policy (BOP): bundles general liability, property and business interruption coverage.
4. Commercial property insurance: can cover your building and equipment after fire, storms or theft.
5. Commercial auto insurance: can cover vehicles you or your employees drive for work.

What Affects the Cost of Workers' Comp?

There's no single price. Workers' comp is priced on your payroll and how risky your employees' jobs are. Common factors:

1. Job classification codes: many states use NCCI codes, and an office worker and a roofer are priced very differently
2. Total payroll and number of employees
3. Your state
4. Claims history: fewer and smaller claims can lower your experience modifier over time
5. Safety programs: a written safety plan and training can affect how a partner rates your business

Listing each employee under the correct class code matters, because wrong codes can raise costs. For more on pricing, see workers' comp insurance cost.

What Are the Limits on a Workers' Comp Policy?

A workers' comp policy usually has two parts. Part one covers workers' comp benefits, which are set by state law rather than a limit you pick. Part two is employer's liability insurance, which can cover lawsuits tied to a work injury that fall outside workers' comp. Employer's liability limits often start at $100,000 per accident, and many businesses choose higher limits.

How to Get a Workers' Comp Insurance Quote

Tivly matches small businesses with 450+ licensed partners in all 50 states, and it's free to use. Complete the form at the top of the page and a Tivly specialist will reach out to match you with a licensed partner. Or call 877-907-5267.

Reviewed By: Sarah Reid, Licensed Agent