Workers Compensation is a type of insurance that grants benefits to employees who are injured on the job or who develop a health condition related to their work duties. This insurance provides compensation for financial damages related to the incident, including healthcare expenses, lost wages, and any other losses.
In most states, businesses with employees must carry workers’ compensation coverage. Specifics vary from state to state, so you should review your state’s requirements to understand your legal obligations and rights. For instance, some states mandate that employers must have workers’ comp if they exceed a certain minimum number of employees, and others may waive this coverage requirement for particular fields of work.
Workers’ compensation differs from contractor or general liability insurance because it covers employees — not other individuals on a business’s premises. Any individual seeking a contractor license typically needs to furnish a certificate of insurance to complete the process, but workers’ compensation is not required unless a contractor is looking to hire others, either for an individual project or as permanent employees.
Workers’ compensation protects both employers and employees in a variety of different ways. When employees suffer an injury during work, they or their family may be financially compensated for the following damages, if applicable:
Medical and ongoing
Accommodations for when the employee returns to work
Workers’ compensation applies to all types of disabilities — temporary, permanent, full, or partial. This includes occupational illnesses, such as those resulting from exposure to certain substances, as well as repetitive strain or stress injuries.
Note that injuries that occur outside of work or due to employee negligence (such as those resulting from intoxication or deliberate self-injury) may not be covered by this coverage. The length of workers’ comp benefits can also vary by state, you should look into your state’s regulations for more information.
Generally speaking, businesses need workers comp insurance because even the best safety precautions sometimes fall short and injuries and illnesses occurring at the workplace or resulting from work are all but inevitable.