- What is workers' compensation insurance?
- What are the pros and cons of the workers' comp system?
- Is every employer required to carry workers' compensation insurance?
- Is every worker covered by workers' compensation?
- Do employers have to provide workers' comp coverage for independent contractors?
- Is workers' comp required for people who are self-employed?
- Can employers insure themselves?
- Should I expect my employer to tell me about workers' comp coverage when I'm hired?
- What role does an employer have in deciding whether a claim is paid?
- What should I do if I think my employer doesn't have workers' comp insurance?
- What's the difference between long-term disability and workers' comp insurance?
- What's the difference between short-term disability and workers' comp insurance?
- Are employees protected if a workers' comp insurer goes out of business or files for bankruptcy?
Q: What is workers' compensation insurance?
- A: Workers compensation is a state-regulated insurance program that provides benefits to employees who have suffered work-related injuries or illnesses. Workers’ comp is typically an employee’s exclusive remedy for work-related injuries. This means that if you're hurt at work, you must go through workers’ comp to receive compensation, rather than file a lawsuit against your employer.
Although all workers’ comp systems follow the same basic structure, each state has its own rules on eligibility, calculation of benefits, and other determinations relevant to your workers’ comp case.
Q: What are the pros and cons of the workers' comp system?
- A: The workers' comp system stands for compromise. Both sides give and take. While you can't file a lawsuit against your employer, you know that you will be compensated through workers’ comp without having to prove that your employer was at fault for your injuries. On the other hand, while your employer has to pay your workers’ comp claim, it isn't exposed to the uncertain damages awards possible in a lawsuit. (Each state’s workers’ comp system has clear formulas that are used to calculate an injured worker’s benefits.
Q: Is every employer required to carry workers' compensation insurance?
- A: Almost all states require businesses of a certain size to carry workers' comp insurance. In many states, businesses with just one employee must have workers’ comp insurance. In other states, the threshold is typically between three and five employees. The only exceptions are Texas and Oklahoma, which make worker’s comp insurance voluntary, but not mandatory, for private employers.
Q: Is every worker covered by workers' compensation?
- A: Employers must typically provide coverage for all of their employees. However, there are usually limited exceptions. In some states, for example, employers don’t have to provide coverage for certain farm workers or domestic workers. The sole owner of a business may not have to provide coverage for himself or herself, as long as there are no other employees in the business. However, it depends on the law of each state.
Q: Do employers have to provide workers' comp coverage for independent contractors?
- A: No, workers’ compensation is only available for employees, not independent contractors. However, each state has its own test for determining whether a worker is an employee or independent contractor. These tests are often complex and make it difficult for employers to properly classify workers as independent contractors. And, in some states, a worker is automatically considered an employee unless the employer can prove that the worker meets the requirements of an independent contractor.
Q: Is workers'comp required for people who are self-employed?
- A: Usually not. However, even if you aren’t required to by law, it can be a good idea to buy coverage for yourself. If you have workers’ comp insurance and you’re injured while working, your medical treatment will be paid for by worker’s comp. You’ll also be eligible to receive partial wage replacements during the time you’re out of work, as well as compensation for any permanent impairment you have as a result of your injuries.
Q: Can employers insure themselves?
- A: Yes. However, each state has various requirements that the employer must meet in order to be self-insured. In general, the business must make a certain amount in annual profits, secure approval from the state worker’s compensation agency, and pay a sizeable security deposit. Most employers don’t meet these requirements and purchase coverage through an insurance company.
Q: Should I expect my employer to tell me about workers' comp coverage when I'm hired?
- A: Most states require employers to post notices about workers' comp in easy-to-access areas, such as in your break room or near your time clock. The notice should confirm that your employer has the required coverage. Your state workers’ compensation agency may also allow you to look up information on your employer’s coverage on its website.
Q: What role does an employer have in deciding whether a claim is paid?
- A: If your employer has purchased coverage through an insurance company, the insurance company will decide whether your claim is accepted or denied. However, the insurer will speak to your employer as part of its investigation process, at which time your employer might make statements to dispute your claim. For example, if your employer doesn’t believe that your injuries are work-related, it will inform the insurer of its position.
For the most part, you will be dealing with the insurance company, which will decide what treatment is authorized, calculate the amount of benefits you are entitled to, and ultimately pay out your claim if it is accepted. Although, under some insurance policies, the insurance company will need to get your employer’s approval before agreeing to a settlement.
Q: What should I do if I think my employer doesn't have workers' comp insurance?
- A: You should still report your injury to your employer right away. At that point, your employer is required to provide you with the necessary forms or information to make a workers’ comp claim with its insurer. If your employer tells you it doesn’t have coverage, or if it doesn’t provide you with information on how to file a claim, contact your state's workers' comp agency. You may be able to make an anonymous report about your employer's lack of coverage. Employers can face hefty fines for not carrying the required workers' comp coverage.
If it turns out your employer doesn’t have workers’ comp insurance, you will typically have a couple of options. One option is to file a lawsuit against your employer in court. This would allow you to recover additional sums of money that are not available through workers’ comp. For example, you could recover the full value of your lost wages (rather than just a portion, as in workers’ comp), and you could recover for your “pain and suffering”—the negative emotions, physical discomfort, and inconvenience you’ve experienced as a result of your injuries.
As a second option, many states have funds that cover injured workers when their employers fail to secure the required workers’ comp insurance. These funds are often called “Uninsured Employers Funds.” You must file a claim with your state’s workers’ comp agency to collect from this fund.
Q: What's the difference between long-term disability insurance and workers' comp insurance?
- A: Workers' comp insurance is mandatory for most employers and provides coverage for work-related injuries and occupational diseases. Long-term disability insurance helps replace an employee’s income when he or she is unable to work due to a non-work related disability. Long-term disability insurance is not mandatory, but many employers offer this coverage as a benefit of employment.
Q: What's the difference between short-term disability and workers' comp insurance?
- A: Like long-term disability insurance, short-term disability insurance helps replace income when you’re out of work due to a non-work related disability. However, short-term disability benefits are usually available earlier on than long-term disability benefits, but for a shorter period of time overall. Short-term disability coverage is often offered by employers as a benefit of employment.
Q: Are employees protected if a workers' comp insurer goes out of business or files for bankruptcy?
- A:Yes. Most states have a guaranty fund to cover claims when an insurer is insolvent. Contact your state's workers’ comp agency for specifics in your state.