What Is Workers' Compensation Insurance?

Definition and Examples of Workers' Comp Insurance

Workers' compensation insurance is mandated by law in most states and covers employees and employers in different ways.

Employee Protections

For employees, workers' comp protects them from:

• Medical expenses for injuries sustained during the course of their job
• Lost wages for any time they cannot work due to those injuries

It also provides lost wages to an employee's family if the employee dies in the course of their work.

Employer Protections

Workers' comp also protects employers in the following ways:

• It prevents employees from suing them for workplace injuries (although there are some limits we'll discuss below).
• It protects them from having to pay significant state fines and employee injury expenses out of pocket, as well as from state-mandated shutdowns for failure to provide workers' compensation insurance.

How Does Workers' Compensation Work?

In most states, your employer will purchase workers' compensation through an insurance carrier in accordance with state law. Rates will be based on state levels established for the various types of workers employed by the business.

If you are injured on the job, you should reach out to your employer immediately. They will then initiate the claims process with the insurance company. By law, you have a right to medical care.

If for some reason you cannot work because of your injury, you will be provided money out of your employer's workers' comp insurance. You'll also be able to submit your medical bills to the insurance company.

What Does Workers' Comp Cover?

Injuries that qualify for workers' comp coverage could be a result of sudden injuries or problems that come from long-term work circumstances. Examples include:

• Falling at the workplace
• Cutting yourself on machinery
• Long-term injuries, such as carpal tunnel syndrome, resulting from repetitive motions
• Respiratory issues from breathing toxic chemicals
• Having an accident on the road while running errands for work

The key factor in determining coverage is not whether it happened at your physical workplace, but that it happened while you were conducting business for your employer. Likewise, who is at fault is not necessarily as important as whether your situation has occurred due to your work. If your illness, injury, or disability is due to a work-related situation, then you may qualify.

However, there are some exceptions. If you were intoxicated at the time of injury, for instance, that could nullify employer liability. Similarly, if you were breaking the law or intentionally injuring yourself, that may not be covered.

Employee Rights in Court

Generally, workers' comp is the "exclusive remedy" for employees who are injured on the job. That means you can't sue your employer for damages when you're injured at work. In most cases, you'll need to seek reimbursement through workers' compensation.

However, there are some situations in which you can sue your employer for workplace injuries. In general, these involve cases of negligence or actual intent to injure. For instance, if your employer fails to repair a known issue with a piece of machinery and it leads to injury or they neglect to replace a harmful chemical with a suitable alternative, you may be able to take them to court under tort law.

The Bottom Line

When it comes to dealing with workplace injuries, much has changed since the early 1900s. If someone got injured at work back then, they usually just had to deal with lost wages, finding another job, or living with a permanent disability. People had to prove that the injury was due to an unsafe work environment in court.

Most workers could not afford the costs associated with suing their employers. Eventually, labor unions pushed for worker's compensation insurance to protect employers. By 1948, most employers in nearly every state were required by law to provide some type of worker's compensation insurance for their employees.

Although it's not a perfect system, worker's compensation insurance now offers employees a much higher probability of receiving compensation for work-related injuries. It provides essential protection for workers and employers alike.