Workers’ compensation insurance provides medical care and other benefits to employees who are injured while on the job.
Workers' compensation is a "no-fault" system. Employees who are legitimately injured as a result of their work receive benefits as set by law, regardless of who is at fault.
Workers' compensation covers three categories of injuries or illnesses:
- Injuries or illnesses that result from a specific work-related accident
- Injuries or illnesses that occur over a period of time that are directly related to employment (e.g. cumulative trauma)
- Occupational diseases (e.g. exposure to toxic substances used in the workplace)
Under employers’ liability, the policy may provide defense and indemnification to a policyholder for a civil lawsuit (outside the jurisdiction of workers’ compensation) alleging damages for an employee’s work-related injury.
Who needs workers' compensation insurance?
Workers’ compensation laws and requirements vary by state, but generally any business that has employees must have it.
In many states, it is common for the following people to be exempt from coverage:
- Business owners
- Unpaid volunteers
- Independent contractors
Note: States can levy penalties against businesses that fail to meet their workers’ compensation regulations.