Types of workers’ compensation insurance

The main benefit categories are generally included in standard workers’ compensation plans:

• Medical treatment: Coverage for an employee’s necessary medical care after a work-related injury or illness.

• Rehabilitation: Support for ongoing treatment or therapy for an employee’s recovery.

• Wage replacement: Partial income benefits for employees who can’t return to work immediately.

• Disability benefits: Payments for permanent or temporary disability resulting from a job-related incident.

• Death benefits and funeral expenses: Support for beneficiaries if a work-related incident results in loss of life.

These benefit types remain largely consistent across policy structures. Where employers typically see major differences is in the structure and funding of the plan itself.

Plan types vary by provider and by policy structure. The plan that makes sense for you also depends on state regulations and your organization’s risk tolerance, industry, and financial goals.

Depending on the state you operate in—and in some cases, the industry you’re in—your plan options may include:

• State programs: Some states offer privatized systems, while others operate monopolistic funds through which employers purchase state-issued coverage. Competitive state funds may also compete with private insurers.

• Federal programs: Certain workers, including federal employees and workers in specific industries (such as maritime or energy), fall under federal programs with unique requirements.

• Commercial programs: Most employers purchase coverage from private insurance carriers, such as Sentry, that offer a range of options, safety resources, claim management, and customer support.

Employers also choose their workers’ compensation plan based on how the policy is structured and funded.

Guaranteed cost plans follow the most traditional and straightforward structure. Employers pay a fixed premium that doesn’t change based on claims activity during the policy period. Guaranteed cost plans offer:

• Predictable, stable premiums

• Straightforward billing and administration

• Lower complexity compared to other plan types

These plans are best suited for businesses that prioritize stability or do not have the risk profile to consider loss-sensitive options.

Loss-sensitive policies adjust costs based on your actual claims. These plans can reward strong safety performance and offer employers more control over long-term costs. Loss-sensitive workers’ compensation plans come in a range of structures:

• Retrospective rating plans

• Small deductible plans

• Large deductible plans

These options allow employers with strong safety programs and consistent claims performance to potentially reduce their long-term workers’ compensation spend.

Self-insurance is the most complex option and is generally suited for organizations with strong finances, mature risk management programs, and consistent claims performance.

Employers pay claims directly rather than transferring risk to an insurer. Self-insurance offers maximum control but also carries the greatest financial responsibility.

At Sentry, we work closely with employers to help build and sustain their workers’ compensation plans. We also offer experienced, in-house claims management and built-in safety services with our workers’ compensation insurance solutions.