Insurance and Security

Workers' compensation: A breakdown of coverage

Make sure your business — and employees — are protected.

Published: February 21, 2012
Updated: February 19, 2017

Workers' compensation insurance laws differ by state. Each state determines such features as the amount of benefits to which an employee is entitled, what impairments and injuries are covered, how impairments are to be evaluated and how medical care is to be delivered.

There's no getting around the fact that with its ever-changing statutes and regulations workers' compensation insurance is likely the most complex you'll buy for your business. But that doesn't mean purchasing it has to be complex.

Breaking down the coverage

Workers' compensation insurance can help provide income and medical benefits to employees who are injured on the job or while performing job-related tasks while on or off the premises. Specific coverage includes:

  • Financial compensation for medical expenses including medication and prescribed therapies

  • Rehabilitative care

  • A portion of the employee's income lost during the period the injured employee is unable to work

  • Compensation for any permanent injuries and benefits to survivors of workers who are killed on the job

In exchange for workers' compensation insurance coverage the injured employee is precluded from suing his or her employer.

Example: While delivering flower arrangements from your shop, an employee is involved in a fender bender that leaves him with a broken leg and unable to work for three weeks. Workers' compensation insurance will help to reimburse his medical expenses and offset some of his lost income during that time.*

Not sure about the coverage that fits your business? Because workers' compensation insurance requirements vary from state to state, working with an insurance agent who is familiar with your state's specific regulations is in your best interest.

Get the most from your premium

Just as requirements for workers' compensation insurance vary from state to state, so do premiums. But wherever you live, there are simple steps to take that may help reduce your premiums:

  • Comparison shop and get multiple quotes

  • Implement a worker safety or risk-management program

  • Give accurate and up-to-date information about your business and number of employees

Create a custom coverage solution

Although standalone workers' compensation insurance programs have been the standard for years, recent improvements in payroll processing now allow businesses the option to pay their workers' compensation insurance premiums when processing their payroll. This "pay as you go" option often helps eliminate both premium down payments and year-end audit adjustments and can help improve cash flow. Make sure to ask your business insurance agent if they offer a "pay as you go" payment solution.

What about Texas?

Even though workers' compensation coverage isn't required in the state of Texas, employers in the Lone Star State should still consider this coverage to help protect themselves from lawsuits: If you choose not to carry workers' compensation, you could be personally held liable for any injuries your employees sustain. And employers who choose not to carry workers' compensation coverage must still comply with a number of rules according to the Texas Department of Insurance.

The bottom line: check your state's requirements to make sure your business — and employees — are protected.

*Example is for illustrative purposes only and does not change or alter coverage in any way; coverage is subject to the terms, conditions, and exclusions of the policies.