Workers' Compensation Insurance: What Employers Should Know

What is workers' compensation insurance?

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

Workers' comp also protects the business. In most states, it's the main way an injured employee is paid for a work injury. That usually limits lawsuits against the employer.

Rules vary by state. Your state's department of insurance or workers' comp board sets the details.

What does workers' compensation cover?

Workers' comp commonly covers:

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 pay for 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.

Is workers' comp required in my state?

Most states require workers' comp once you hire employees. Some states start the rule at one employee. Others start at three, four, or five. The rules can also differ by industry.

In four states, you buy workers' comp from a state fund instead of a private insurer: North Dakota, Ohio, Washington, and Wyoming. State fund policies often don't include employer's liability coverage.

Texas is the main state where most private employers can choose not to carry it. Even there, many clients and contracts ask for proof of workers' comp before you can bid on work.

Skipping required coverage can lead to fines. In some states, it can lead to criminal charges.

See our state specific pages:

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

Which businesses may not need workers' comp?

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

1. Sole proprietors with no employees
2. Some partnerships and LLC members
3. Businesses that only hire independent contractors

Rules vary by state. Some owners choose to cover themselves anyway. A licensed partner can explain what applies to your business.

What other coverage do employers carry?

Many small businesses pair workers' comp with:

1. General liability insurance: Covers injuries to customers and damage to their property.
2. Professional liability insurance: Covers 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: Covers your building and equipment after fire, storms, or theft.
5. Commercial auto insurance: Covers vehicles you or your employees drive for work.

How much does workers' compensation insurance cost?

There's no single price. Workers' comp is priced based on your payroll and the risk of your employees' jobs.

Common factors include:

1. Your industry and job classification codes
2. Total payroll
3. Number of employees
4. Your state
5. Claims history

Many states use job class codes from the National Council on Compensation Insurance (NCCI). Each code reflects how risky the work is. An office worker and a roofer are priced very differently. Learn more in our workers' comp cost guide.

What are the limits on a workers' comp policy?

A workers' comp policy usually has two parts.

Part one pays workers' comp benefits. Those amounts are set by state law, not by a policy limit you pick.

Part two is employer's liability. It covers lawsuits tied to a work injury that fall outside workers' comp. These limits are often $100,000 per accident to start. Many businesses choose higher limits.

What affects your workers' comp premium?

Your premium can change based on:

1. Safety programs: A written safety plan and training can affect how a partner rates your business.
2. Correct job classes: Each employee should be listed under the right class code. Wrong codes can raise costs.
3. Claims history: Fewer and smaller claims can lower your experience modifier over time.
4. Group programs: Some trade groups and states offer group workers' comp programs.

Many owners review their policy each year. A licensed partner can explain what affects your premium.

How does Tivly match me with a licensed partner?

Tivly matches small businesses with 450+ licensed partners in all 50 states. 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 to speak with a representative.

Reviewed By: Sarah Reid, Licensed Agent