Workers comp, without the jargon

What workers compensation is

Workers' comp is insurance that pays benefits to employees who get hurt or sick because of their job. In return, injured workers usually cannot sue their employer for that injury. This trade is often called the "exclusive remedy" rule. It protects workers and it protects the business.

Each state writes its own workers' comp law. There is no single national program for private employers, so the rules for who must buy coverage, which benefits are paid, and how claims are reported depend on the state where the employee works.

What it pays for

A workers' comp policy generally pays for:

• Medical care for the work injury or illness, often with no copay for the worker.
• Part of the wages the worker loses while they cannot work.
• Extra benefits if the injury leaves a lasting impairment.
• Help getting back to work, such as job retraining, in some states.
• Death benefits and funeral costs for the family if a worker dies from a work injury.

What it does not cover

Workers' comp is not general liability insurance. It does not pay when a customer slips in your store or when your work damages someone's property. It also does not cover independent contractors who are truly in business for themselves, and it does not cover injuries that have nothing to do with work. Most policies come with a second part, called employer's liability, which helps if you are sued over a work injury in a way the state law allows.

Who needs a policy

In most states you need coverage as soon as you hire your first employee. Some states start at three, four, or five employees, and construction often has a lower threshold. Part-time and seasonal workers usually count. Texas is the main state where most private employers can choose not to carry coverage, but they must then follow notice rules and give up legal protections.

Owners and contractors need a closer look. A job title or a 1099 form does not decide whether someone is an employee. Our requirements by state guide lists the starting rule for every state.

How to get coverage

Most businesses buy a policy from a private insurance company, often through a licensed agent. Many states also run a state fund that competes with private insurers. In four states (North Dakota, Ohio, Washington, and Wyoming), most employers must buy coverage from the state fund. Larger businesses with strong finances can sometimes get state approval to self-insure.

What to gather before you shop

Have this ready before you call an agent or insurer:

• A plain description of everything your business does, not just the main service.
• Every state where employees live or work, including remote workers.
• Each employee's job duties and your estimated yearly payroll by job type.
• Who owns the business and whether owners will be covered.
• Any subcontractors you use and their proof of insurance.
• Your claims history for the last three to five years, if you had coverage before.

Understand the estimate

This website gives a rough estimate for planning, not a binding quote. Some job classes use backup rates, and state adjustments are only examples. Your final premium can be different because of your claims history, minimum premiums, fees, whether you qualify, and the insurer's own pricing.