How Does Workers’ Comp Work?

Your employees’ health, wellness, and safety are your #1 priority. However, even with strict rules and safety precautions in place, accidents and illness can still happen in the workplace.

When an employee experiences a work-related injury or illness, that employee qualifies for benefits known as workers’ compensation, or often just referred to as workers’ comp. These benefits help pay for medical expenses and lost wages due to the injury or illness preventing that employee from working.

Nearly every US state requires that employers carry workers’ compensation insurance. Many states require it even if a business only has one employee.

Even though workers’ compensation insurance is mandatory for most businesses, many business owners may still need to fully understand how workers’ compensation works.

In this article, we’ll explain how workers’ compensation insurance works. We’ll also look at what’s covered by workers’ compensation insurance and what’s not. Finally, we’ll explore some tips to help lower your workers’ compensation costs.

What Is Workers’ Compensation?

Workers’ compensation is a type of business insurance carried by an employer. This insurance covers medical bills and lost wages for employees due to injuries or illnesses that occur at work.

What’s Covered by Workers’ Comp?

Workers’ comp can cover a wide variety of expenses due to employee injury or illness in the workplace. Here are some of the most common:

Medical Visits And Costs

Workers’ comp can cover the expense of any medical-related visits stemming from an employee’s workplace injury or illness. This can include emergency or urgent care visits. It can also include any treatments required during those visits, such as surgery, diagnostics, or prescriptions.

Lost Wages

If the injury or illness prevents the employee from performing their regular duties, they can receive a portion of their wages through workers’ comp. The amount of wages that are covered can vary by state.

Extended Care

For more severe injuries or illnesses, employees sometimes must receive extended care or ongoing treatments to make a full recovery. Workers’ comp can cover these extended care costs.

Funeral Expenses

If a death occurs as the result of a workplace injury or illness, workers’ comp can help cover the expenses of funeral arrangements and burial costs. Under certain conditions, death benefits can also be paid to the employee’s family.

Disability Payments

If an employee has been disabled for an extended period of time due to an injury or illness, disability benefits can be paid to cover a portion of lost wages during that time.

What’s Not Covered by Workers’ Comp

Not all injuries will be covered by workers’ comp, and there are several exceptions that mostly deal with the employee’s behavior or conduct before the injury. The following are generally not covered by workers’ comp insurance:

Intentional Acts

If an injury is the result of an intentional act, then it will not be covered by workers’ comp.


How does a workers’ comp claim work for instances of intoxication? Injuries that result from the employee being under the influence of alcohol or certain drugs are not covered by workers’ comp. There are some rare exceptions to this, and in most cases, it must be proven that intoxication was not the sole cause of accident or injury.

Fighting Or Horseplay

Any horseplay is not considered an actual workplace activity, so injury from such actions will likely not be covered. An example would be if workers were throwing a ball around, and one fell while attempting to catch the ball. This type of injury would generally not be covered.

However, if it can be proven the worker was not engaged in the horseplay but was injured as a result, then that injury may be covered.

Illegal Behavior

How does workers’ comp insurance work for illegal activity? Naturally, performing any illegal or criminal actions that result in injuries is also not covered by workers’ comp insurance.

Violating Company Policy

If the injury occurred while the employee was violating company policies, the benefits may be reduced. This can include, for example, violating safety or conduct policies.

All exceptions mentioned above are unique situations and do not imply that coverage is not offered if the employee is at fault.

Does My Company Need Workers’ Comp?

Yes, in almost every state, all businesses are required to have workers’ comp insurance, even if they only have a few employees. In some cases, only one employee is enough for certain states to require workers’ comp.

One thing to keep in mind is that even if your state and the specific number of employees do not legally require you to carry workers’ comp insurance, it’s still a wise decision to do so. Without workers’ comp insurance, the company may be liable for medical bills and expenses if an injury or illness is suffered by an employee.

Workers’ comp insurance can also help minimize some of the liability a company is exposed to if there is an accident. This is another reason why carrying workers’ comp insurance is a wise investment, even if not legally required.

Now we’ll look at the benefits this type of insurance can bring.

What Are The Benefits of Offering Workers’ Compensation?

So, how does workers’ compensation work in terms of offering benefits to employers? One of the main benefits of carrying workers’ comp insurance is that it protects the business from liability and expensive payouts if an employee is injured and can no longer work.

Without this insurance, the business would likely have to pay these costs. Also, most workers’ comp insurance benefits include a liability waiver when the benefits are accepted. This means in most cases, an injured employee cannot further sue the company once they have accepted workers’ comp benefits. This is called exclusive remedy.

This can help limit a company’s exposure to an employee injury and may prevent further litigation that would otherwise be quite costly.

But how does workers’ comp work for employees? How does it benefit them? The benefit of workers’ comp is that it lets employees know they are protected should an accident or illness occur, regardless of fault. This vital coverage can be the difference between an employee making a healthy recovery with minimal financial stress instead of being saddled with bills and the need to pursue litigation.

Having workers’ comp insurance is a benefit for employees, and it can help to retain and hire the best talent.

How Does Workers’ Compensation Work?

In the unfortunate event that an accident or illness takes place at work, the workers’ comp claim process can be handled rather quickly. However, there are certain time limits and requirements that need to be met to ensure benefits are paid out.

Educate Employees About How To File Workers’ Comp Claims

Before accidents occur is the best time to discuss and train staff on how to report an injury or illness under workers’ comp. By doing this, employees that are injured (as well as human resources personnel) know exactly what to do to ensure all requirements are met following an incident.

The first step is to have your employee document the accident as best they can. Details like the date, time, and location are all crucial. Any other pertinent information should also be disclosed. Ensure to also collect information from co-workers who witnessed the accident or have information regarding what happened.

ICW Group policyholders can find everything they need in the Claims section of the Policyholder Center.

If you have any questions about the type of forms or information that needs to be collected, contact your insurance company.

Advise The Employee To Seek Medical Treatment

If the employee has not sought medical treatment, advise them to see a professional immediately. This is an important part of the claims process, and anyone injured needs to be evaluated by a medical professional as soon as possible.

This evaluation and any treatment will need to be submitted as part of the claim, which is the next step. ICW Group’s Nurse Triage Hotline is available 24/7 when an injury occurs. An injured worker, after providing notice of an injury or illness to their employer, can call the hotline and be evaluated over the phone on recommended next steps. By calling the hotline, a claim is immediately started.

Employer Files A Claim With Their Insurance

Once the employee reports an injury or illness, the responsibility is then on the employer to submit a claim as soon as possible.

Contact the insurance company that handles your workers’ comp policy and inform them that you need to make a claim. Depending on your specific policy and situation, they will instruct you on which steps to take next.

One important note is that several states require workplace accidents to be reported to various state agencies. Make sure to check the local laws in your area to learn what reporting requirements are necessary for workplace accidents.

If you are unsure about this step, a good place to start is by contacting the Secretary of State’s office where you live. They can help you contact the workers’ comp board or other regulatory groups that need to be informed of any workplace accidents.

Wait For Your Insurance To Process The Claim

Once you have submitted all the necessary information, your insurance will begin to process the claim. Your insurance company should keep you updated on the process as it moves along.

Returning To Work

Companies will want to have a policy in place for returning workers after a workers’ comp claim. This policy can deal with any lasting injuries or restrictions and allow for modifications to accommodate the returning worker.

Overall, businesses want a smooth transition when employees return to work so that they can be productive and comfortable as soon as possible. This benefits both the company and the employee.

What Is The Cost Of Workers’ Comp? 

Like most insurance policies, there are no set prices, and policy premiums are based on several factors. These factors include payroll as well as the type of work they are required to do. Higher-risk occupations like construction or heavy machine operation often have higher rates for workers’ comp coverage.

Risk management is critical to running a successful business, and workers’ comp insurance is a key component of managing risk and limiting potentially huge liabilities. So, in this regard, workers’ comp is a wise investment that helps protect the business and the employees in the event of an injury or illness.

How to Reduce Cost of Workers’ Comp Claims

In order to save on your workers’ compensation costs, you’ll want to lower your experience modification rate, or Ex-mod. An Ex-mod is a helpful tool that is used to calculate your workers’ compensation insurance premium based on your claims history. Ultimately, minimizing workers’ comp claims comes down to one thing: prevention. Once an accident occurs, it’s too late. This means training and education in the workplace that focuses on worker safety and health is essential.

Enact safety protocols where workplace injuries may occur, such as warehouse areas or locations where equipment is used. Businesses may also want to set up a safety team with a team leader who can conduct an audit of various workplace activities and locations. This audit can look out for any unsafe areas or procedures that can be improved. Once the audit is completed and changes are made, the team can educate employees on the new protocols.

You can also contact your workers’ comp insurance carrier to help develop a safety plan. ICW Group’s Risk Management Consultants provide free risk assessments with policyholders and will help businesses develop their safety plans.

If a workplace accident does occur, make sure to have a return-to-work plan already in place. This plan can address a worker’s limited duties upon return and ways for the business and the employee to deal with any restrictions.

Allowing workers to return to work faster helps reduce costs, so it’s critical to ensure everything is done to make their return as easy and comfortable as possible.

Protect Your Business with ICW Group

Workers’ comp insurance is a vital part of any business, and in most cases, it’s required by law. But fully understanding your workers’ compensation insurance policy and premium can be overwhelming.

At ICW Group, we’ve helped businesses in virtually every industry receive the most value from their workers’ compensation insurance.

ICW Group
ICW Group
ICW Group is a national, multi-line insurer with an A (Excellent) rating from A.M. Best, quoting over $3 billion annually, and the largest privately held insurance company based in California. We distinguish ourselves in the market by offering our insureds free, cost-saving services, highly proactive in-house claims handling, aggressive anti-fraud services, and industry-leading in-house risk management services designed to help insureds achieve fewer and less costly claims and lower their future premiums. For more information about ICW Group, visit

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