Every state, with the exception of Texas, requires employers to have workers’ compensation insurance. Having coverage protects business owners from financial losses due to their employees’ work-related injuries or illnesses, plus it limits an employee’s ability to sue for damage. However, the actual workers’ compensation benefits go to employees who might not know exactly what those benefits cover.
Explaining the benefits of workers’ comp to employees can go a long way for an employer who wants to make sure any injured workers get the coverage that is coming to them. Employers can use the information to teach employees about being safer in the workplace and minimize problems if they ever have to file a claim.
Four Types of Workers’ Compensation Benefits
There are four types of benefits that workers’ compensation insurance provides for employees who suffer illness or injury in the course of their employment. Specific details about these benefits may vary because of state regulations, but their overall definitions remain the same.
Medical costs is the workers’ comp benefit that pays for the expenses incurred to treat work-related injuries. Most states require the costs to be reasonable and necessary to qualify. Covered expenses often include things like immediate first aid, ambulances bills, and medical care, including necessary surgeries, prescriptions, and physical therapy costs. Some states compensate workers for their travel costs for treatments deemed medically necessary.
For example, if a heating, ventilation, and air conditioning (HVAC) technician falls off a ladder while inspecting a customer’s heating unit, he may first need an ambulance. Once diagnosed, he may then see a specialist for his back injury, take pain killers, and even require surgery. Workers’ compensation insurance medical cost coverage pays for all of this.
Workers often are unable to return to work while hurt or sick, and this means they may not get their regular paycheck. This is where the disability payments kick in. Workers’ compensation insurance pays a portion of the employee’s average weekly wage, depending on the type of disability the worker has.
Average weekly wage: An employee’s average weekly wage represents their earning capacity for a set period prior to an injury. The formula can vary by state. For example, several places use a state average weekly wage based on the average income for all workers in that state.
There are four types of disability payments:
- Temporary partial: An injury or illness that renders the employee temporarily unable to perform most work tasks
- Temporary total: An injury or illness that temporarily prevents an employee from working at their original occupation; however, the employee is expected to return to full capacity at some point in the future
- Permanent partial: An injury or illness that’s expected to last for the remainder of the employee’s life and prevents them from completing certain work tasks; this typically reduces the employee’s earn capability
- Permanent total: An injury or illness that is expected to last for the remainder of the employee’s life and prevents them from ever working again in any capacity
For example, someone may be considered permanently partially disabled if they lose a finger in the accident. A temporary total disability might be when a worker falls down and hits their head, getting a concussion that they recover from in three weeks. Someone with a partial injury will receive less in disability payments than someone with a total disability.
There are some injuries that will prevent an employee from being able to return to their original job. When the injury is permanent and prevents ongoing work in the previous type of employment, workers’ compensation usually pays for job training in a new field that the employee is capable of working in. This is called vocational rehabilitation.
For example, if a carpenter gets a cut on her hand that leads to permanent nerve damage preventing her from using her hand in carpentry work, she would be eligible for vocational rehabilitation. The training might be for an office position where her hand injury doesn’t prevent successful completion of her duties, but it can also help compensate for her injury so that she can return to her original position.
Pro tip: Employers can help injured employees by developing their own return-to-work program. Their efforts to retain workers often are rewarded with improved morale and productivity.
If an employee dies from a work-related injury or illness, their spouse, children, and other dependents are eligible for death benefits to compensate for the loss of financial support that the employee provided. These benefits include funeral expenses, often capped at a certain amount by the state, and may also include additional payments for minor children until they reach the age of 18. The death of the employee can happen after an extended permanent disability but must be attributed to the injury or illness.
For example, an employee who develops mesothelioma from working in a shipyard may be sick for a long time before he passes away. If his death is caused by mesothelioma, his beneficiaries would be able to claim the workers’ compensation death benefits. However, if he died from something not related to his mesothelioma or his job, his family would not be eligible for workers’ comp benefits.
Who Gets Workers’ Compensation Benefits?
In most states, the majority of employees are eligible for workers’ compensation benefits. This is true whether the employee is part- or full-time. Coverage must start the day the employee starts, so they’re protected in the event they’re injured immediately after reporting for their first shift. Failing to do that could leave an employer exposed to fines and other penalties.
Generally speaking, sole proprietors, partners, and business owners are exempt from coverage and can be excluded from the payroll calculations used to determine the workers’ compensation premium. However, many of the states that exempt these individuals also allow them to opt in. Other common exemptions include federal employees, domestic workers (e.g., personal assistants, nannies), and independent contractors.
Coverage extends to duties and activities performed during the course of work. This means, in most states, that a person is covered while at lunch, during breaks, and sometimes even running errands for the business. As long as the employee is not willingly breaking safety protocol, engaging in illegal behavior, or involved in horseplay, they can file a claim for workers’ compensation benefits. Employees injured while engaging in prohibited activities are excluded from coverage.
Workers’ compensation insurance is an important tool for creating safer work environments. Employers can use policies as a way to help employees better understand what safe working protocol is, how not to get hurt at work, and what types of activities are forbidden. If an employee does get sick or hurt during work activities, the workers’ compensation policy protects employers from having to pay for damages out of pocket.