Workers Compensation

Workers Compensation Definition

Workers Compensation is the insurance against the workplace injury, and it covers the damage due to injury by providing monetary benefits to the employee. It saves the interest of both the parties, the employer as well as the employee. The worker will get the monetary benefit that will cover medical expenses, disability benefits, and even lost income. Also, it will save the employer from being sued as the compensation insurance policy is in place for the benefit of the employees.

Examples of Workers Compensation

  • The workers can claim against slip and falls injury at the workplace. However, it should be immediately reported to the management before the statute of limitation runs out, else it may result in rejection of the claim.
  • In a construction zone, workers may get struck by an object from a high level; they can claim against these types of injuries.
  • A worker may claim injury due to machinery accident as well. However, these have become lesser since employers tend to implement many safety measures for machinery operators.
  • In factory jobs where heavy lifting is required, the workers working for more than ten hours may strain or overexert their muscles. A worker can claim injuries due to overexertion from workers compensation insurance.

Types of Workers Compensation

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The worker’s compensation insurance scheme provides the below types of benefits:

  • Medical Treatments: It covers doctor’s appointments, hospital visits, medication, therapy, and recovery equipment at the time of workplace injury.
  • Disability Benefits: In case of temporary disability, the insurance policy can help employees with some of their lost income till the time they are not able to return to work. In case of permanent disability, the insurer can provide disability benefits for life.
  • Rehabilitation: The worker’s insurance can provide ongoing care to the employees concerning physical therapy or rehabilitation.
  • Death and Funeral Services: In case the employee loses life due to injury at the workplace, some insurance policies can provide coverage for death and funeral expenses as well. The limit on the cover for this expense differs from state to state.

Calculate Cost of Workers Compensation Insurance

The formula to determine the cost of workers compensation insurance is as follows:

Workers’ Compensation Cost = (Annual Employee Payroll ÷ 100) × Worker’s Compensation Insurance Rate.

For calculating the cost of the insurance as per the above formula, the company will have to determine the following as well:

Who Sells Workers Compensation Insurance?

Employers buy workers’ compensation insurance as a separate insurance policy. Each state in the U.S. has its own rules.

  • In some states, employers purchase the insurance policy from the state monopoly insurer.
  • And in some states, it is bought from the state funds or private insurers.


  • The workmen compensation insurance provides help to the injured employees, and till the time it is there, the employer cannot be sued for injury in workplaces.
  • The insurance provides no-fault coverage, which means that they will provide coverage for injury happening at the workplace even if the worker is partially responsible for the same.
  • The worker’s compensation insurance increases the company’s brand value; it shows that the company values its employees.

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