Workers Compensation
What Is Workers Compensation Insurance?
If one of your employees gets hurt on the job, develops a work-related illness, or dies in a work accident, workers compensation insurance covers the cost of benefits required by state law.
Workers compensation insurance is required for most businesses with employees.
What Does Workers Compensation Cover?
Workers compensation insurance covers costs stemming from your employee’s job-related injury or illness, including medical expenses and rehabilitation costs. If your employee dies as a result of this injury, it can also cover death benefits.
Your state determines which benefits are covered under workers compensation, not your policy. However, most states cover the following benefits.
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| Type of Benefit | What It Includes | Example |
|---|---|---|
|
Medical expenses |
Doctor visits, hospital care, medication, and rehab |
Employee breaks an arm lifting boxes and needs surgery |
|
Partial wage replacement |
A portion of the worker’s income while they can’t work |
Employee is out for six weeks and receives a percentage of their usual wages |
|
Rehabilitation benefits |
Physical therapy or job retraining |
Employee needs physical therapy to return to lifting safely |
|
Death benefits |
Payments to dependents if a worker dies from a work injury |
Employee dies in a work-related accident, and benefits are paid to their family |
Workers Compensation vs. General Liability: What’s the Difference?
Workers compensation and general liability are two common and essential types of coverage for many small businesses, yet they serve different purposes.
While general liability insurance covers injuries to third parties, such as customers, it won’t cover your employees’ injuries. You need workers compensation insurance to cover those expenses.
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| Question | Workers Compensation | General Liability |
|---|---|---|
|
Who is covered? |
Your employees who are injured while working or develop job-related illnesses |
Third parties (e.g., customers, clients, landlords) |
|
Type of harm |
Work-related injuries or illnesses to employees |
Bodily injury or property damage to others |
|
Typical benefits |
Medical bills, partial wages, rehab, and death benefits |
Legal defense, settlements, and medical payments for third parties |
|
Is it often legally required? |
Often required once you have employees (varies by state) |
Usually not mandated by law, but required by many contracts |
|
Main goal |
Protect workers and help them recover |
Protect your business from injury and property damage claims by others |
What Are the Most Common Workers Compensation Claims?
Some of the most common workers compensation claims include:
- Physical injuries, such as fractures, strains, and sprains
- Repetitive stress injuries, like carpal tunnel
- Illnesses developed via exposure to hazardous materials or irritants, such as asthma
Employees are often injured while operating machinery, driving work vehicles, slipping and falling, or being struck by an object.
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| Situation | Is This a Workers Comp Issue? | Why |
|---|---|---|
|
Employee slips on a wet floor in your warehouse |
Yes |
Employee injured while working |
|
Customer slips in your storefront |
No |
Third-party injury, not an employee (falls under general liability) |
|
Employee gets carpal tunnel from repetitive tasks |
Yes |
Gradual work-related injury / occupational disease |
|
Owner-only business, no employees, owner gets hurt |
Usually no (depends on the policy and state law) |
Workers comp may not automatically cover owners |
|
Independent contractor (IC) is injured on site |
Maybe |
Typically, ICs are not covered under your workers comp policy; they often need to purchase their own |
When Do You Need Workers Comp Insurance?
You need workers compensation insurance if any of the following apply to you:
- You have one or more W-2 employees (even part-time or seasonal)
- Your state requires workers comp once you reach a certain number of employees (number varies by state)
- You sign contracts that require proof of workers compensation coverage
- You work in a higher-risk industry (construction, trades, manufacturing, etc.)
- You want a plan in place before an employee is hurt, not after
Even if you aren’t legally required to carry workers comp, having this coverage in place is a crucial part of protecting your hard-working employees if they’re hurt on the job.
It also prevents you from paying out of pocket to cover their benefits, which can quickly add up to five or even six figures, depending on the situation.
Note: OH, ND, WA, and WY are considered monopolistic states, meaning they require you to purchase workers compensation insurance through a state-run fund instead of a private insurer like Insurance Canopy.
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