What does Workers' Comp Cover?

One of the most important kinds of insurance for any small business with employees is workers’ compensation coverage. No matter what type of work you perform, you need to ensure employee safety, taking every precaution to prevent injuries or illness from occurring in the workplace.

But no matter how diligent you are, you can’t eliminate 100% of risks for your employees.

That’s why you need workers’ comp: to cover costs incurred by your workers, in the unfortunate event that an accident does occur while they’re on the job.

What is workers’ comp?

Workers’ comp helps to protect your business from the one-two punch of financial harm that accompanies physical workplace injury. But that’s not all: workers’ comp also protects you, the small business owner, in more ways than one.

Should an accident involving your employee occur on the job, workers’ comp protects both you and your employees from devastating financial harm.

If you’re wondering what does workers compensation insurance cover, there are two main areas to consider:

  • Who in particular is covered
  • Which specific costs are covered

Let’s discuss.

Who does workers’ comp cover?

Your workers. And you, the employer, by extension.

Most states in the US require you to carry workers’ comp insurance for all full-time employees. In addition, many states require coverage for part-time workers, as well as temporary workers and contractors. However, there are exceptions and exclusions in place that depend upon the kind of worker or size and location of your company.

For example, federal government employees are typically not required to be covered by state-mandated workers’ comp. In addition, the following professional classes and types of worker are not required to be covered in certain states:

  • Family members
  • Casual workers
  • Business partners
  • Business owners
  • Real estate agents
  • Insurance agents
  • Farmhands

The workers’ comp requirement is determined in part by both the relationship of the worker to the organization and the specific kind of work a worker performs.

In addition, the size and location of your company matter, as some states only require workers’ comp for companies with a certain number of employees.

What costs does workers’ comp cover?

Typically, it’s all matters of expenses incurred by workers as a result of a work injury. In practice, that can mean coverage for the following expenses:

Immediate medical expenses – Workers’ comp covers treatments related to injuries and illnesses, including but not limited to:

  • Doctor and hospital visits
  • Prescribed medications
  • Necessary surgeries

Long-term medical care – In addition to upfront costs of immediate medical attention, a workers’ compensation policy can also help cover medical bills related to chronic or other longer-term health conditions, such as:

  • Physical therapy for work-related injuries
  • Medication for allergies or other long-term ailments
  • Treatment for aggravated conditions like carpal tunnel

Missed wages – Workers’ comp doesn’t just cover expenses incurred; it also compensates for losses to expected income. If an employee misses work due to a work-related injury, a portion of their missed wages can be recouped through workers’ comp.

Permanent injury or death – In the event that a workplace injury results in permanent disability or death, the worker and his or her family is entitled to special care, including but not limited to:

  • Prolonged disability benefits above and beyond medical coverage and missed wage coverage offered to all non-disabled victims
  • Funeral costs and death benefits to beneficiaries

Workers’ comp offers a wide and deep range of expenses for your employees. In a perfect world, accidents would never happen, and they’d never need to worry about these expenses.

But in our world, accidents do happen.

Workers’ comp helps soften the blow.

And in our world, lawsuits also happen. If the employees’ own coverage for the above costs is inadequate, they may sue to cover the difference. Workers’ comp helps your business by mitigating risk and covering expenses that a lawsuit would make your responsibility.

Basically, it helps you help your employees.

Why you need workers’ comp coverage?

To set your business up for success, you’ll need to cover all your bases in terms of required licensing and insurance. For most businesses in most states, that means a combination of general liability insurance and workers’ comp. As a recap, the biggest takeaways about workers’ comp include:

It covers your business in the case of a workplace injury or illness: Certain kinds of employees aren’t covered by workers comp Certain industries have different employee thresholds for coverage

It covers various types of costs resulting from a workplace injury: Immediate and long-term medical expenses Lost wages due to workplace related injury

Now that you understand all there is to know about workers’ comp, it’s time to find a plan that makes sense for you. Cover your employees (and your whole business) so you can focus on what really matters—reducing the risks of workplace accidents and perfecting the goods and services your customers rely upon.

State-specific requirements

Here are the minimums and special cases, state by state (states not listed only need one employee apart from the business owner to require workers’ comp):

None – Texas is the only state that does not require any company to have workers’ comp insurance, regardless of size or industry.

Two or more employees – Just Virginia requires workers’ comp for businesses with two or more employees, including part-time staff.

Three or more employees – The most common minimum. Several states require workers’ comp for businesses with at least three employees:

  • Arkansas
  • New Mexico
  • North Carolina
  • Wisconsin

Four or more employees – Another unique minimum; only businesses in South Carolina must carry workers’ comp if they have at least four employees.

Five or more employees – Two states require workers’ comp for businesses with at least five employees:

  • Alabama
  • Mississippi

Special cases – In two states, the minimum number of employees required varies depending on the type of company and/or workers:

  • In Florida, construction businesses need workers’ comp if they have one or more workers, but non-construction businesses must have four or more workers. Agriculture firms must have six or more employees, or twelve seasonal workers working for more than one month.
  • In Missouri, construction businesses with one or more employees must carry workers’ comp coverage. But other businesses must have at least five workers in order to meet the minimum.

As mentioned above, your workers aren’t the only ones covered by workers’ comp benefits. As the business owner, workers’ comp insurance also protects you from the costs that can be involved in workplace injuries, as well as the lawsuits that sometimes result. Now, let’s get to the other question: exactly what does a workers’ compensation policy cover, cost-wise?

The content on this page has been verified by
Terri Hitchcock, JD
Chief Insurance Officer, Thimble
Terri has 38 years of industry experience and knows a thing or two about insurance, so she reviewed and approved everything on this page.

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