What Does Workers' Comp Insurance Cover?

Workers' comp policies cover injuries that happen during the policy period, regardless of when claims are filed. An injury from January can be reported in March and still be covered, though most states require reporting within 30 to 90 days.

Each state's workers' compensation schedule sets benefit amounts for injured employees. Two factors determine the calculation: injury severity and the employee's average weekly wage. Together they set the benefit amounts for medical treatment, wage replacement and related costs.

An example: A construction worker earning $1,000 a week suffers a back injury and can't work for three months. Benefits are calculated as follows:

• The state assigns a disability rating based on injury severity and its effect on the worker's ability to perform their job
• Most states replace 60% to 70% of average weekly wages (in this case, $600 to $700 a week during recovery)
• The schedule determines how long benefits last based on whether the disability is temporary or permanent

Benefit amounts are set by state law, not negotiated case-by-case. Your insurer processes the claims and pays benefits according to your state's schedule under Part A (workers' compensation coverage). The exception is Part B (employers' liability coverage), where you choose limits that cap lawsuit-related payouts.

Workers’ comp does more than pay benefits after an employee gets hurt. Depending on the situation, your policy can also respond to certain injury-related lawsuits or cover employees working in another state. These protections are divided across Parts A, B and C.

Workers’ comp usually doesn’t cover an injury when it has little or no connection to the employee’s job. In some cases, that’s easy to spot:

• The injury happened during a personal activity. If an employee gets hurt away from work while doing something unrelated to their job, workers’ comp usually won’t cover the claim.
• The employee’s actions caused the injury. Coverage may not apply if someone gets hurt because they were intoxicated or intentionally harmed themselves. Claims tied to criminal activity or a knowingly false claim can also be excluded.

Other cases are harder to judge because work and personal activities can overlap. Say an employee who works from home slips while walking to the kitchen. If they were grabbing lunch, the injury isn't work-related. If they slipped while carrying work materials from one room to another, there’s a stronger connection to their job.

If that connection isn’t clear, check with your insurer before assuming the injury is or isn’t covered.

If an employee gets hurt at work, workers’ comp helps you deal with the costs that follow instead of paying everything out of pocket. In some situations, you'll also need coverage in place before you can operate in certain situations.

When someone gets hurt, start by figuring out whether they’re an employee or an independent contractor. Then look at what they were doing when the injury happened, since workers’ comp coverage usually depends on whether the injury was connected to their job. Those details give you a starting point for figuring out whether a claim may be covered.

Your policy should also reflect how your business operates today. If employees begin working in another state or your staffing changes, tell your insurer so your coverage can be updated.