How Does Workers Compensation Work

Workers' Compensation is a system that requires employers to pay for medical costs and lost wages if an employee is injured on the job.

Future earnings losses due to a work injury are also covered by most workers compensation programs. In many cases, vocational rehabilitation is covered too. That can include things like training required to get a new job and physical therapy.

In the case of work related death, workers compensation also requires that dependents are paid benefits. Funeral costs are generally covered as well.

We have workers compensation because the alternative is that employees would have to sue employers to get compensated for injuries. Workers compensation is a no-fault system that ensures that injured workers get what they deserve and that the downside for employers is reasonably capped.

There are fifty-five different workers compensation programs in the United States. That includes one for each of the states as well as for Puerto Rico, the District of Columbia and the Virgin Islands. In addition, there are two federal workers compensation programs that cover government employees, longshoremen and harbor workers.

Each state defines its own regulatory mechanisms, eligibility rules, benefit schedule, and funding options.

Most employers are required by state law to have workers compensation insurance.

In most states, employers purchase coverage through private workers compensation insurance carriers. In some states, however, commercial insurance for workers comp is not allowed. In these instances, there is usually a state workers compensation fund and employers get coverage through the state or self-fund their insurance.