What You Need to Know About Workers' Comp Insurance Coverage



Workers' compensation, also called workmans' compensation or workers' comp, is a type of insurance that pays benefits if you're injured on the job. Workers' comp insurance pays a portion of your wages and all approved medical expenses directly related to your injury. It may also cover vocational rehabilitation, temporary and long-term disability, and death benefits.

Statutory Requirements

Workers' compensation is statutory, which means each state has its own laws requiring employers to provide their workers with insurance coverage. These requirements vary from state to state. They set out the duties of employers and rights of employees when an injury occurs.

Not all employers are required to carry workers' comp insurance. Depending on the state, some smaller companies with a limited number of employees are exempt from having to provide coverage. Other employers may be exempt from state requirements because they have enough assets to provide intra-company insurance with benefits equal to, or better than those provided under the state's workers' compensation laws. These companies are referred to as self-certified.

Here's a list of each state's workers' comp laws.

Be sure not to confuse workers' compensation disability benefits with state unemployment benefits. They are entirely different. You can review your state's unemployment laws here.

What Workers' Compensation Insurance Covers

Lost Wages

In most states, workers' comp insurance coverage pays an injured worker approximately 66 percent (two-thirds) of his normal weekly wages. The formula used to determine the exact amount of partial wage payments varies from state to state.

Example: Partial Wage Reimbursement in New York

In the State of New York, a worker who becomes totally or partially disabled and is unable to return to work for more than seven days receives payment for lost wages based on his weekly pay for the previous year. The formula for calculating the allowable amount of lost wages in New York uses two-thirds of the last year's weekly pay, multiplied by the percent of current disability.

If the injured worker's weekly pay for last year was $600.00 and the doctors certify her as 100 percent disabled, she would receive $400.00 per week while she isn't able to work:
$600.00 x 2/3 = $400.00 x 100% disability = $400.00

If the doctors certify her as 50 percent disabled, she would receive $200.00 per week while she isn't able to work:
$600.00 x 2/3 = $400.00 x 50% disability = $200.00

The length of time for receiving these partial wage payments is determined by the type of injury and extent of medical treatment required. In addition, the duration is set by each state's maximum pay-out period regulations.

For example, an injured worker in New Mexico can receive wage compensation for up to 700 weeks, depending on the percentage and type of disability. In California, an injured worker can receive wage compensation for up to 204 weeks, also depending on the nature of the injury.

Approved Medical Expenses

In most cases, workers' compensation benefits include payment for medical and therapeutic expenses.

Medical expenses normally include hospital costs and required diagnostic tests, such as MRIs and CT scans. Related out-of-pocket expenses, such as wheelchairs, crutches and, in some cases, transportation to and from treatment centers, can be covered. More liberal coverage may include counseling, pain therapy, holistic remedies, and acupuncture. In most cases, experimental treatment is not covered.

If you're injured on the job, generally you must ask your employer for a list of doctors approved by his workers' comp insurance company. Each state has its own time period within which you must choose a doctor and be evaluated. Time periods may range from 30 to 90 days. If you don't get a medical evaluation within the required time period, you may lose your right to continue your claim.

After you've been evaluated by an employer-approved doctor, you may seek an independent opinion from a doctor of your own choosing. You may have to pay the costs out of your own pocket, although in some states you can be reimbursed before your claim is completed. Be sure to request copies of your diagnosis, prognosis and any other notes relevant to your injury from your own doctor(s). You must submit that information to the workers' comp insurance company.

Physical and Vocational Rehabilitation

Most states' workers' comp laws provide injured employees the right to physical and vocational rehabilitation.

Physical rehabilitation covers medical and therapeutic care. This includes physical therapy to assist in coping with the effects of your injury and to help you return to your job duties. Physical therapy frequently covers the cost of licensed physical therapists, massage therapists, and others certified to assist with the healing process.

Vocational rehabilitation provides various tools to prepare you for a new job with your current employer or when seeking a job elsewhere. Vocational rehabilitation coverage varies from state to state and may include:

  • Retraining for a different type of job within the company
  • Education and tuition payments for retraining
  • Résumé and employment application assistance
  • Assistance in searching for a new job with another company
  • Specialized testing to determine if you have skills for a new career
  • Counseling regarding employment expectations and qualifications

Death Benefits

Most workers' compensation state laws include death benefits when an employee dies as a result of an on-the-job injury. Funeral expenses are normally covered; however, the amount paid varies from state to state. In New York, the maximum coverage for funeral expenses is $6,000.00. In Alabama, the maximum coverage is $3,000.00.

Death benefits are paid to family members who were dependent on the decedent and her income, generally spouses and biological and adopted children. The amount of the death benefit is usually the same percentage of compensation the decedent would have been entitled to if she were alive. In most cases, that amount is two-thirds pay times the percentage of disability.

When there are no immediate family members, death benefits pass to next of kin, including siblings, parents, etc. Some state laws leave the question of non-immediate family beneficiaries open to interpretation. Determining which non-immediate family members will receive the death benefits is often done via administrative hearings or through court litigation.

Type of Disability and Benefit Duration

The duration of your workers' comp coverage normally depends on the type of injury or disability you sustained. There are four types of disability categories used in calculating the amount and duration of your benefits:

  1. Temporary Total Disability is the most common type. This is an on-the-job injury that completely prevents you from working for a limited amount of time. Benefits normally end when you're medically cleared to return to work.

  2. Temporary Partial Disability prevents you from doing some, but not all, of your job duties for a limited amount of time. Benefits normally end when you're medically cleared to resume all of your former job duties.

  3. Permanent Total Disability prevents you from ever returning to work, whether for your current employer or another employer. If the injury results in death, benefits will be paid to immediate family members for as long as state law permits. If death does not occur, you have the option of retraining for a new and different type of work. Your disability benefits cease when you begin a new job.

  4. Permanent Partial Disability is permanent injury that partially impairs your ability to work. This type of disability is often controversial. Injured employees often disagree with the medical determination that their ability to work is only partially impaired when they're considered permanently disabled.

The Compensation Bargain - Pros and Cons

Compensation bargain is an informal term relating to workers' comp coverage. It alludes to the trade-offs employers and employees must make under the workers' compensation system.

Workers' comp insurance is a form of no-fault insurance for on-the-job injuries. It serves employers because their employees are not permitted to sue them for negligence. This exempts employers from having to pay for an injured employee's pain and suffering. Payments are limited to partial wage reimbursement and medical/therapeutic benefits (and death benefits where applicable).

It serves employees because they don't have to fight with an insurance company or file a lawsuit to prove their employer was negligent. If an employee is injured on the job, she receives partial wage reimbursement and medical/therapeutic coverage without having to file a lawsuit.

One of the main disadvantages for employees is the inability to recover anything more than partial wages and medical/therapeutic costs. This can be especially frustrating when an employee is dependent on a full paycheck to support a family. The employee normally can't receive compensation for her pain and suffering or bring a claim against her employer for punitive damages.

Workers' Compensation and Social Security Disability

A common question is, "Can I receive workers' compensation benefits and federal Social Security Disability benefits at the same time?"

The answer is yes; however, there can be some stipulations. When the Social Security Disability Administration learns you are receiving workers' comp payments, Social Security may offset the amount of benefits they pay you.

Generally, the total amount of combined workers' compensation and Social Security disability payments cannot be more than 80 percent of your original earnings (the earnings upon which your workers' comp benefits were based). While your workers' comp benefits remain the same, your Social Security benefits are decreased (during the time you are collecting workers' comp) so that the total doesn't exceed 80 percent of your pre-injury earnings.

Example: Workers' Comp and Social Security Disability

For a person who was earning $4,000.00 per month, the maximum monthly amount allowed for the combined total of workers' compensation and Social Security benefits is $3,200.00, which is 80 percent of previous income. When the workers' comp benefits are exhausted, Social Security payments revert to the full amount originally awarded.

Case Studies

Benefits for Independent Contractors
Are independent contractors covered by the company they are temporarily working for? Here we discuss some relevant legal issues, using the example of a construction accident case involving product liability.

Is Housing Included in Compensation?
In this workers comp lawsuit, the plaintiff is making a case that, for the purposes of wage compensation, certain benefits of employment should be included in her benefits.

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