Part One: Workers Compensation Insurance (Coverage A)

Policy Structure

The workers' compensation policy has two main parts:

Exam Key: Part One has NO policy limit—the insurer pays whatever benefits state law requires, no matter how large.

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The Four Types of Benefits

1. Medical Benefits

Coverage: 100% of all reasonable and necessary medical treatment related to the work injury.

Key Features:

• No dollar limit on medical expenses
• No waiting period—benefits begin immediately
• No deductible or copays for the injured worker
• Covers: Hospital, doctors, prescriptions, surgery, physical therapy, medical equipment

2. Disability Benefits (Wage Replacement)

Standard Rate: 66⅔% (two-thirds) of the employee's Average Weekly Wage (AWW)

The Four Categories:

Waiting Period: 3-7 days before disability benefits begin (medical benefits have NO waiting period)

Retroactive Payment: If disability exceeds a certain period (often 14-21 days), benefits may be paid retroactively to day one.

3. Death Benefits

For Surviving Dependents:

• Typically 66⅔% of deceased worker's average weekly wage
• Surviving spouse: Until death or remarriage
• Children: Until age 18 (or 21-25 if in school)
• Funeral/burial expenses: Typically $5,000-$10,000

Eligible Dependents:

• Spouse (assumed dependent in most states)
• Children under 18
• Disabled adult children
• Other relatives who lived with and depended on deceased

4. Rehabilitation Benefits

Medical Rehabilitation:

• Physical therapy and occupational therapy
• Medical care necessary to recover
• Prosthetics and adaptive equipment

Vocational Rehabilitation:

• Job retraining if cannot return to former position
• Tuition and education expenses
• Job placement assistance
• Skills training for different occupation

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Calculating Benefits

Average Weekly Wage (AWW)

Formula: Add all gross earnings for 13 or 52 weeks before injury, divide by number of weeks.

Includes:

• Regular wages and overtime
• Bonuses and tips
• Vacation pay
• Per diems and housing allowances

Benefit Calculation Examples

Temporary Total Disability (TTD):

• AWW = $1,500
• Benefit = $1,500 × 66⅔% = $1,000/week

Temporary Partial Disability (TPD):

• Pre-injury AWW = $1,500
• Current earnings (light duty) = $900
• Lost wages = $600
• Benefit = $600 × 66⅔% = $400/week

Note: Benefits are non-taxable, so 66⅔% of gross pay often approximates previous net (take-home) pay.

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Maximum Medical Improvement (MMI)

Definition: The point after which no further significant recovery can reasonably be expected, regardless of continued treatment.

Legal Significance:

• Does NOT mean full recovery
• Triggers end of temporary benefits
• Triggers evaluation for permanent benefits
• May trigger vocational rehabilitation assessment

State Examples:

• New York: Presumed MMI at 130 weeks (2.5 years)
• Texas: Temporary benefits end at MMI or after 104 weeks, whichever comes first