What Is Workers Compensation Insurance?

Employers are legally obligated to take reasonable care to ensure that their workplaces are safe. Nevertheless, accidents happen. When they do, workers’ compensation insurance provides coverage.

Workers’ compensation insurance serves two purposes: It assures that injured workers get medical care and compensation for a portion of the income they lose.

Workers receive benefits regardless of who was at fault in the accident. If an employee dies while working, workers comp provides death benefits for their dependents.

Each State Is Different

Statutes in each state establish workers’ compensation systems. State laws and court decisions control the program in that state, and no two states have the same laws and regulations.

States determine such features as the number of benefits for employees, coverage for specific impairments and injuries, evaluation techniques for impairments, and medical care delivery.

In addition, states dictate whether workers’ compensation insurance is provided by state-run agencies and private insurance companies or by the state alone. States also establish how to handle claims, how to resolve disputes, and how to devise strategies, such as limits on chiropractic care, to control costs.

If your business expands to another state, you may have to deal with very different rules in the new state.

What Injuries Are Covered?

Injuries employees sustain on the workplace premises or anywhere else while acting in the “course and scope” of employment are covered if their employer has workers comp insurance.

For example, the leading cause of workers comp death claims is traffic accidents that occur when the employee is in a vehicle for work purposes, whether the trip is made in the company’s car or the employee’s own vehicle. Accidents driving to and from work are not covered.

Workers comp insurance also covers certain illnesses and occupational diseases (defined in the state statutes) contracted due to employment.

What Treatment Do Injured Workers Receive?

Injured workers receive all medically necessary and appropriate treatment. With medical costs soaring, many states have adopted measures designed to rein in expenditures. These include utilization management guidelines, which describe acceptable treatment protocols and diagnostic tests for specific injuries.

What Benefits Do Injured Workers Receive?

Income replacement benefits are based on whether the disability is total or partial and permanent or temporary. States define impairment as reducing earnings capacity, sometimes using the American Medical Association’s criteria.

Most states require that benefits be paid for the duration of the disability, but some specify a maximum number of weeks, particularly for temporary disabilities. The benefit amount is a percentage of the worker’s weekly wage (actual or state average).