How does workers’ compensation work?

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Workers' compensation covers the costs of employee injuries and illnesses, including lost wages and more. It's required by law in most states for businesses with employees.
An office worker suffering wrist pain

If an employee is injured or sickened on the job, workers’ compensation insurance can pay for the worker’s medical expenses and rehabilitation costs. If the employee is forced to miss work due to the injury, workers’ comp can also provide partial lost wages. In addition, some policies provide death benefits if an employee is killed while performing a job-related duty.

Workers’ comp insurance also has benefits for employers. A policy can cover legal expenses if an employee decides to sue for damages caused by an occupational injury, illness, or accident.

Who is required to buy workers’ comp insurance?

Most business owners with employees are required to purchase coverage, although workers’ comp requirements vary depending on where the business and employees are based. To make sure your business has the appropriate coverage for your state’s requirements, talk to an Insureon agent who specializes in insurance for your industry and who can explain how workers’ comp functions in your state.

Sole proprietors and freelancers usually are not required to carry coverage, but they may still want to consider purchasing a policy. If they are injured while working, workers’ comp ensures they will at least have partial income while unable to work. 

How workers’ compensation claims work

Employees who experience a workplace injury or occupational illness should immediately report the incident to the employer. Reporting periods are different for each state, and if an employee doesn’t make a report before the specified deadline, he or she might not receive benefits.

After an injury or illness is reported, business owners and employees should take the following steps:

Visit an approved healthcare professional

Injured or ill employees should seek medical assistance immediately – any delays can put their health and benefits at risk. The doctor will then provide a medical report to file with the employee’s injury claim. 

Start the claims process

Employers are responsible for providing the appropriate forms, information about the claims process, and the contact details for the business’s insurance company. 

File the claim

The employee should file a claim with the employer’s insurance company, making sure to pay attention to reporting deadlines. The claim should include any state-mandated paperwork, forms, and medical reports.

Receive benefits

Once the insurance provider approves the claim, the employee will begin to receive workers’ compensation payments. Benefits can include coverage for the employee’s medical expenses, rehabilitation costs, and two-thirds of their wages while they are medically unable to work.

Return to work

An injured employee might return to work on a reduced schedule or full time, depending on the recommendation of the treating physician. Employers should make reasonable accommodations to help the employee during the transition back to the workplace and provide any necessary safety training to ensure the same type of injury doesn’t happen again. 
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Workers’ compensation settlements

Employees who get sick or injured on the job can often agree to a workers’ comp settlement with their employer instead of accepting the insurance company’s offer. This is a voluntary agreement between the worker and the employer to close out the case in return for the worker receiving a lump-sum payment. Once a settlement is finalized, it resolves the matter fully and permanently. 

How does workers’ compensation insurance benefit businesses?

No workplace is ever completely safe or without risk, even if businesses have comprehensive safety policies in place. According to occupational injury data from the U.S. Bureau of Labor Statistics:

  • Businesses experienced 1.1 million occupational injuries and illnesses in 2017 that resulted in days away from work.
  • Employees missed work for a median of nine days due to their injuries.

Employers are ultimately responsible for any worker injuries, which is why most states require business owners to carry workers’ compensation coverage. Without proper coverage, business owners could be forced to pay out of pocket for an injured employee’s medical treatment, as well as potential fines, depending on the state. 

Take action to reduce workplace injuries

Providing a safe work environment can benefit business owners and their employees. Here are a few steps employers should take to minimize the chance of a workplace accident:

Conduct regular safety training. Reinforce best practices for safety and conduct, such as training employees how to properly use equipment.

Keep the door open. Business owners should let employees know they can always share questions or concerns about safety in the workplace. That way, if an employee brings up a potential safety issue, the business owner can take corrective measures before someone gets hurt.

Provide information about the plan. Employers should provide information about how workers’ comp works to all new hires and hold periodic refreshers on the process with existing employees. 

Compare quotes from trusted carriers with Insureon

Complete Insureon’s easy online application today to compare quotes for workers’ compensation insurance from top-rated U.S. companies. Once you find the right policy for your small business, you can begin coverage in less than 24 hours.


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