Workers’ Comp: What It Is, Who’s Covered & How It Works

No one wants to consider what might happen if they were injured at work, but it's to your benefit to be familiar with workers' compensation and how it works just in case.

Learn all about workers' comp (formerly known as workman's comp): what it is, who pays for it, what it covers and how it works.

What is workers' compensation insurance?

Workers' comp is a special type of insurance that covers medical expenses for those who experience illness or injury as a result of their job. This insurance is paid for by the employer.

The employer's cost is based on several factors, including past workers' comp claims.

“There’s a lot that can help a business owner control their risk associated with employee injuries,” Andrew Dalton, assistant vice president for The Hartford’s small commercial workers’ compensation line of business, told Forbes Advisor. “You don’t want to leave these things to chance and you want to be certain you have safety protocols and procedures and that your business has taken steps to reduce the kinds of things that can cause injury.”

What’s covered under workers' comp?

How workers' comp operates and what it covers varies greatly by state, but here are some areas that are generally part of it:

• Medical expenses: includes hospital visits, medications and emergency surgeries.
• Lost wages: may be partially covered if the employee must take time off work to recover. (For example, a back injury requiring no lifting for three months, and the employee is required to lift 50 pounds or more for his job.)
• Disability benefits: if the injury caused a partial or permanent disability. (For example, a spinal cord or head injury.)
• Ongoing care: such as physical therapy. (For example, if a hip, leg or arm is broken.)
• Death benefits: these typically include funeral costs and survivor benefits for the worker's family.

Who qualifies for workers' comp?

While workers' compensation is a government-mandated program, who qualifies varies from state to state. Each state manages its own program. Some states exclude small businesses from mandated workers' comp provision. Others have separate requirements for different industries.

Generally, though, only permanent employees are covered, while contract or freelancers are not.

A summary of each state’s workers' compensation requirements is maintained by the National Federation of Independent Business (NFIB).

How does workers' comp work?

What is the process for using workers' compensation if you are injured on the job? This is how it works, according to Forbes Advisor:

• Notify your employer as soon as possible after you are injured. Deadlines vary from state to state, but prompt notification is required.
• Get medical care from a qualified professional. You may need to use a health care provider approved by your employer.
• Complete the required paperwork. Make sure you include the details about how your illness or accident happened, as well as when and where.
• Your employer will file the claim with its workers' comp insurance company, which is responsible for any payout.
• The insurer will either approve or deny your claim. You can appeal if you are denied.
• If it is approved, the insurer will make an offer of compensation.
• You must decide whether to accept what the insurance company offers, or you can choose to negotiate. If negotiating a settlement, you may benefit from hiring a lawyer with expertise in workers' comp.
• If you can’t agree on a settlement amount, an administrative law judge (ALJ) will decide what compensation, if any, you receive. The ALJ must work within your state’s workers’ compensation system.
• When you have recovered, you return to work.

Illness or injuries caused at work can be challenging to navigate. Knowing what workers' comp is, if you qualify for it, and how it works in your state can be helpful. You can find specific information about your state’s workers' compensation policies on the U.S. Department of Labor site.

Resources:

Forbes Advisor: How Does Workers' Compensation Work?

Forbes Advisor: How Does A Workers’ Comp Settlement Work? 2023 Guide

Investopedia: Workers’ Compensation: What It Is, How It Works, And Who Pays

National Federation of Independent Business (NFIB): Workers' Compensation Laws — State by State Comparison

USA GOV: Workers' compensation

U.S. Department of Labor: State Workers' Compensation Officials