Workers Compensation
Workers compensation is a state-mandated insurance system that provides medical benefits and wage replacement to employees who are injured or become ill due to their job, in exchange for employees giving up the right to sue their employer for negligence.
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Exam Tip
Workers comp = NO FAULT. Employee gives up right to sue. Covers medical + 66.67% wages. Does NOT cover independent contractors or intentional injury.
What is Workers Compensation?
Workers compensation (workers' comp) is a form of insurance that provides wage replacement and medical benefits to employees injured in the course of employment. It operates under a "no-fault" system—employees receive benefits regardless of who caused the injury.
The Grand Bargain
| Employee Gives Up | Employer Provides |
|---|---|
| Right to sue employer | Guaranteed benefits |
| Proving employer negligence | Medical coverage |
| Pain and suffering damages | Wage replacement |
| Punitive damages | Rehabilitation |
What Workers Comp Covers
| Coverage | Description |
|---|---|
| Medical Expenses | All reasonable and necessary treatment |
| Disability Benefits | Wage replacement during recovery |
| Rehabilitation | Physical therapy, retraining |
| Death Benefits | Payments to surviving dependents |
| Burial Costs | Funeral expenses |
Types of Disability Benefits
| Type | Description | Duration |
|---|---|---|
| Temporary Total (TTD) | Cannot work at all, temporarily | Until recovery or MMI |
| Temporary Partial (TPD) | Can work with restrictions | Until recovery or MMI |
| Permanent Total (PTD) | Cannot work at all, permanently | Often lifetime |
| Permanent Partial (PPD) | Permanent impairment, can work | Based on rating schedule |
Wage Replacement
| State Average | Percentage |
|---|---|
| Typical | 66.67% of average weekly wage |
| Maximum | Capped at state maximum |
| Minimum | State minimum applies |
| Waiting Period | 3-7 days before benefits start |
What's Not Covered
| Exclusion | Example |
|---|---|
| Intentional self-injury | Deliberately injuring yourself |
| Intoxication | Injury while drunk/high on job |
| Willful misconduct | Violating safety rules |
| Off-duty injuries | Not related to work |
| Horseplay | Fooling around at work |
| Pre-existing conditions | Unrelated to work |
Employer Responsibilities
| Responsibility | Details |
|---|---|
| Insurance | Must carry workers' comp insurance |
| Posting | Display required notices |
| Reporting | Report injuries to insurer |
| No Retaliation | Cannot fire for filing claim |
| Medical Access | Provide authorized medical care |
Independent Contractors
Workers' comp generally does NOT cover independent contractors. The distinction matters greatly for:
- Tax purposes
- Liability exposure
- Insurance requirements
Premium Factors
| Factor | Effect on Premium |
|---|---|
| Classification Code | Type of work (office vs. construction) |
| Payroll | Higher payroll = higher premium |
| Experience Modifier | Past claims history |
| State | Different state rates |
Exam Alert
Workers' comp = NO-FAULT system. Employees give up right to sue in exchange for guaranteed benefits. Typically covers 66.67% of wages. Does NOT cover intentional injury, intoxication, or independent contractors. Every state requires it (except Texas).
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