Is Worker’s Compensation Insurance Compulsory in the USA?

Know what employee pay is and how it works with Worker’s compensation Insurance. You probably know it’s required for most employers in most states, but you may be wondering how it works. Meaning, I know I’ll get a policy, but what happens after that? Good question, and I’m going to answer it for you right now.

Hello, I’m Gordon Coyle, and welcome to my channel where I talk about business insurance and risk issues on the minds of business owners and entrepreneurs like you. In this video, I’ll explain how Workers’ Compensation Insurance works. As I mentioned, workers’ compensation is a state requirement in most states when you have employees. Most employers purchase a policy from an insurance company to meet that legal requirement.

Beyond the policy, Workers’ Comp works to cover employees who get injured or become ill on the job and their medical costs if they need time away from work to recover and recuperate. And lost wages are paid. Workers’ compensation policies protect both the employer and each of the employer’s employees in different ways. The employee is safe in knowing that if he or she is injured or contracts an illness on the job, he or she has statutory benefits to cover medical bills, hospitalization, and lost wages.

What happens when a worker dies while working?

But workers’ compensation goes beyond this to also include vocational rehabilitation, funeral and survivor benefits if an employee dies on the job, and long-term compensation for permanent injuries. The employer knows that workers’ compensation is between them and faces financial ruin if an employee is injured. Additionally, section two of a workers’ comp policy also protects the employer if they are sued by the employee or their family for extenuating circumstances.

I am often asked if workers’ compensation covers all injuries. The answer is no. There are situations where the workers’ composite does not respond. And the most common example I see is when an employee gets injured while working. Usually, on the weekend, play sports or work around the house and the employee doesn’t have health insurance, so they try to pretend to get injured at work on Monday morning.

In many cases, these frauds are caught by the insurance company or their employer and are not covered. In such situations, the employee may be accused of committing insurance fraud.

Does the company pay for employees who accidentally get injured while working?

Broadly speaking, any injury or illness that occurs outside of work and in the performance of a job-related duty is not covered. If an employee intentionally injures himself, this is also not covered. If an employee gets injured while committing a crime, it is not covered. A common situation I have seen is when an employee assaults another employee and is injured in the process of that assault and then files a workers’ compensation claim.

Worker's Compensation Insurance

An employee injured on the job while under the influence of drugs or alcohol is also generally not covered. Now, the rules vary from state to state, but these are the most common reasons why employee injuries are not covered by worker’s compensation insurance. Who pays workers compensation? The employer pays the premiums for workers’ compensation, and no portion of that premium is deducted from employee paychecks like health insurance.

This is entirely borne by the employer. The next question I often hear is how does an employer purchase workers’ compensation insurance? I have a specific post on that topic which you can check out here. But in short, in most states, an employer can purchase insurance from several different sources, from an agent or broker like me, through their payroll service, or directly online from another provider.

Companies charge insurance premiums differently in different states.

In many states, premiums will vary from one insurance company to another, so employers often shop around looking for the best deal. Here are some thoughts I have on that topic. First, if you have more than a few employees, you should consider purchasing workers comp through a broker who has specific expertise in this line of business and can help you with security, risk control, claims management, and more. Can, as we do here at Coil.

Group. Second, I’m not a big fan of involving multiple brokers in search of the lowest costs. In many cases, a good broker, like me, represents most of the best insurance companies that write workers’ comp, so we can shop for you and you can avoid the hassle of involving multiple vendors. I made a post on this that explains it very well.

Third, if breaking out your workers’ comp payments with each payroll is important to you, most brokers can get you a policy like Workers’ Comp, so you don’t need to bundle it with your payroll provider. Using your own payroll company usually incurs additional fees. And again, a non-expert is handling an expensive form of insurance and not adding much value to that transaction.


Here is the last line. Workers’ Compensation is the simplest form of business insurance, but that doesn’t necessarily make it any easier. If you are looking for a team of dedicated experts to work on your business insurance, including workers’ comp, to help you get it right and keep it right, I would love the opportunity to speak with you and see if We are the right fit for you and your business.

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