Workers' Compensation Insurance
The grand bargain
Workers' compensation pays benefits for work-related injury or disease regardless of fault, and in exchange the employee gives up the right to sue the employer - the exclusive remedy doctrine. Benefits fall into four buckets: medical (usually unlimited and without deductible), disability income (temporary total, temporary partial, permanent partial, permanent total), death (funeral plus survivor benefits), and rehabilitation.
How income benefits are figured
Disability income is typically a percentage (commonly two-thirds) of the employee's average weekly wage, subject to a state maximum and minimum, after a short waiting period that is often retroactive if the disability lasts beyond a stated number of days. Permanent partial benefits may be paid under a schedule of body parts or by wage-loss impairment. Benefits are not taxable and cannot be waived by the employee.
The standard policy
Part One - Workers' Compensation: the insurer pays all benefits the employer is legally obligated to pay under the statute. Part Two - Employers Liability: covers tort suits that escape exclusivity (e.g., third-party-over actions), with limits such as each accident, disease each employee, and disease policy limit. Part Three - Other States Coverage. Premium is computed on payroll per $100 of remuneration by classification, adjusted by an experience modification factor and verified by audit.
Who is covered
Employees are covered; independent contractors, sole proprietors, partners, and corporate officers may be excluded or may elect coverage. Traps: assuming a worker is an independent contractor because of a 1099, or forgetting that the policy responds to claims in other states only when listed.
Worked example: A roofer earning $800/week is injured and off work 10 weeks. Weekly benefit ≈ 2/3 × $800, capped by the state maximum, starting after the waiting period.