What is workers’ compensation?

Workers’ compensation is typically employer-paid insurance coverage. The following scenario illustrates how it works in practice:

1. An employer pays premiums to their insurance provider for workers’ compensation coverage.

2. An employee becomes injured, ill, or disabled due to a work-related incident.

3. After the employer is notified of the incident—typically by the injured employee themselves—the employer files a workers’ compensation claim with their insurer.

4. If the claim is approved, benefits are paid to help cover the injured employee’s lost wages, medical bills, and rehabilitation costs.

While the process may seem simple, the details of coverage can vary based on state laws, policy terms, and the nature of the job or injury. Factors such as injury type, recovery time, and an employee’s ability to return to work can all influence a claim’s outcome.

Because every workplace is different, the incidents that lead to workers’ compensation claims can take many forms. Some hypothetical examples include:

• A delivery driver who’s injured while using a company vehicle for work.

• A remote employee who experiences a job-related injury while working from home.

• A technician who becomes ill after handling hazardous materials.

Each state determines what situations qualify for workers’ compensation, so coverage that applies in one state may not apply in another. Talk with your workers’ comp. insurance provider to gain clarity on your specific situation.

In most cases, yes. Every U.S. state except Texas requires businesses with employees to carry workers’ compensation insurance. Even in Texas, employers may still need coverage if their employees work in other states or if it’s required by contract.

Some employers choose self-insured workers’ compensation, meaning they assume the financial responsibility for workplace injuries instead of buying an insurance policy. However, this approach comes with strict legal and financial requirements.

State laws play a major role in determining workers’ compensation rules. Several states—North Dakota, Ohio, Washington, and Wyoming—operate monopolistic state funds, which means employers must purchase WC coverage through their state program. In other states, businesses can buy insurance from either private carriers or a state-funded option.

Workers’ compensation helps provide financial security and peace of mind for employers and employees alike. Employees can feel confident they’ll receive medical expense relief and wage replacement if they’re injured on the job, while employers reduce the likelihood of facing unexpected legal and financial risks.

Beyond compliance, investing in workers’ compensation can foster a safer, more supportive workplace culture: one that values employee well-being and long-term business stability.