New Jersey workers’ compensation insurance

Every business that has employees in New Jersey is required to carry workers’ compensation insurance.

State law provides some exceptions for employers covered by federal programs and members of limited liability corporations (LLCs), partners in partnerships, and sole proprietors who don’t employ other people.

Part-time and seasonal employees must be covered by workers’ compensation insurance if they are paid wages or salaries and have taxes deducted. Contractors, interns, and volunteers are exempt from coverage requirements.

A self-employed person isn't required to buy workers’ comp insurance. New Jersey requirements do not mandate this coverage for sole proprietors with no employees, freelancers, or independent contractors.

However, you should consider buying this coverage even if it's not required. Your health insurance might not cover injuries that are related to work, which would leave you responsible for medical bills. On top of that, you would miss out on wage replacement benefits that can help keep your business running while you recover.

To save money on workers' comp insurance, it's important to make sure you classify your employees correctly. Employees with desk jobs or other jobs with a low risk of injury cost less to insure. This also helps you avoid misclassification fines.

In some cases, small business owners can choose to buy pay-as-you-go workers' compensation. This type of workers' comp policy has a low upfront premium, and lets you make payments based on your actual payroll instead of estimated payroll. It's useful for businesses that hire seasonal help or have fluctuating numbers of employees.

Finally, a documented safety program can help lower workers' comp costs. A safer workplace means fewer accidents, which helps keep your premium low.

New Jersey workers’ compensation insurance offers advantages to both employers and employees. It provides medical benefits covering the cost of treatment for injured workers. Workers' comp also covers 70% of their average weekly wage during recovery if the worker is disabled for more than seven days.

Policies usually include employer's liability insurance, which can help cover legal expenses if an employee blames their employer for an injury. However, the exclusive remedy provision in most workers' comp policies prohibits an employee from suing their employer if they accept workers' comp benefits.

Workers' compensation benefits in New Jersey include:

• Medical benefits that cover all medical treatment for the injury
• Temporary disability benefits to replace lost wages
• Permanent partial disability benefits
• Permanent total disability benefits
• Death benefits, including burial expenses, if the employee dies as a result of a work-related injury

Find more information in the Department of Labor and Workforce Development's Workers' Compensation FAQ.

The Department of Labor and Workforce Development's Division of Workers' Compensation regulates and enforces workers’ compensation in New Jersey. Failure to carry appropriate workers’ comp insurance for your business can result in penalties that range from administrative fines to criminal charges as severe as fourth-degree felonies.

The financial penalties are up to $5,000 for the first 20 days of noncompliance and up to $5,000 for each 10-day period thereafter. These penalties are delivered in the form of liens against the employer, and prosecution is through seizure of property.

Workers’ compensation death benefits in New Jersey could be awarded to a surviving spouse and dependent children if an employee dies after a work injury or illness. Children are dependents until age 18, or until age 23 if they are full-time students. There could be additional benefits provided to a dependent child who is physically or mentally disabled.

However, if the surviving spouse remarries, they would no longer be able to receive benefits unless there are surviving children who still require support. In that case, benefits could continue for up to two years.

A civil union partner could also qualify to receive death benefits, and parents and siblings of the deceased are eligible if they can prove dependency.

Workers’ compensation death benefits in New Jersey include:

• Approved medical bills
• Up to $3,500 for burial or funeral expenses
• 50% of the deceased employee’s wages to one dependent
• That amount increases by 5% for each additional dependent, up to a maximum of 70% of the worker’s wages for five or more dependents
• Up to 450 weeks of payments to the surviving spouse; there is a maximum set each year by the Commission of Labor
• Up to 450 weeks of payments to mentally or physically disabled children

It can be beneficial to both employees and business owners to reach a workers’ comp settlement. The State of New Jersey has two types of settlement arrangements:

Section 20 settlement. If the insurance company denied all or part of a workers' compensation claim, the employee and the insurance company could still agree to a full and final settlement as a lump sum. That would mean that the employee gives up all rights to future claims related to that injury, including future medical care.

Section 22 settlement. In this situation, the insurance company agrees to pay permanent disability benefits in installments. This would not require the employee to give up rights to future medical care, and if the condition worsens, the claim could be reopened and additional benefits requested. This additional claim can be made for two years from the final payment of the original settlement.

Several factors affect the outcome of a workers’ compensation settlement. New Jersey claims can be contingent upon the severity of the injury, needs for ongoing medical care, pre-injury wages, ability to return to work, and other pieces of evidence presented.

An injured employee must file a workers' comp claim within a specific statute of limitations. New Jersey’s time limit for filing a claim is two years from the date of injury or the date of the last payment of compensation, whichever is later.

If the injury is an ongoing occupational illness, the claim must be filed within two years of the date the worker became aware of the condition.

Whether you're in Newark, Trenton, or anywhere in between, if you are ready to explore workers’ comp coverage options for your New Jersey business, start a free online application today to compare quotes from top-rated insurance carriers.