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How Workers’ Compensation Works

Topics: Career Advice

Every year, millions of workers in the United States are injured while on the job. They might get sick from being exposed to certain elements in the workplace, or they might break a bone when operating a machine. Employers purchase workers’ compensation insurance to protect themselves when these situations occur, and workers rely on it to make ends meet while they’re off the job.

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According to the Bureau of Labor Statistics, employers in the private sector reported approximately 2.9 million nonfatal illnesses and injuries in 2015. In 2014, there were 4,679 fatal work injuries.

How workers’ compensation operates

Workers’ compensation, which was introduced in 1908, was the first social insurance to be enacted throughout the United States. While each state has its own resources for private businesses, the federal program covers government employees.

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When employees experience illness or injury, or they die while working, the benefits are doled out to the individual or the surviving spouse and/or children. The benefit amounts will be different depending on the circumstances involving the injury, illness, or death.

What is covered by workers’ compensation?

The state will determine what kinds of benefits are covered by workers’ compensation and what is reasonable and necessary for the injury. Workers’ compensation will cover lifetime medical treatments that relate specifically to the problem that happened as a result of a workplace accident.

For example, if a worker hurt his back operating some heavy machinery, workers’ compensation would pay for the surgery, medicine, and any physical therapy needed. If his back feels better in a year, but then starts to act up again two years after that, the insurance would pay for more treatment. The employee and the doctor would need to be able to demonstrate the problem was caused by what happened in the workplace.

Even if the employee can still work with the injury or illness, they can receive benefits if they aren’t feeling 100 percent (i.e. as they were before the injury or illness occurred). Plus, the compensation will cover an employee whenever they’re on the clock. If an employee gets injured while driving in the company car to work, they’re eligible for benefits.

What is not covered by workers’ compensation?

An employee will get workers’ compensation benefits regardless of who was at fault in the accident, even if the employee was being reckless on the job. Due to that fact, the employee is prohibited by law from suing their employer for the accident in nearly every circumstance. This ensures protection for the employer and makes paying the insurance worth it for them. Heart attacks and hernias are almost always going to be questioned, because they usually can’t be directly linked to a workplace situation.

Benefits an employee will receive

There are four types of workers’ compensation situations: temporary or permanent total disability, or temporary or permanent partial disability.

Let’s say an employee goes through a temporary illness or injury. While they are home from work, they will receive temporary income benefits. Their employer will try to get them back to work as soon as possible.

If the employee can work but can’t do the same tasks as they could before they got injured, this falls into the permanent partial disability category. The doctor will ascertain how disabled the person is, which is determined by state-approved criteria. Some states will pay out weekly benefits over time, while others will give the employee one check upfront.

If the injury is more serious and results in a permanent total disability or impairment to the employee’s body, the employee may be given income benefits for life. They can receive Social Security disability benefits at the same time, as long as both types of compensation don’t exceed 80 percent of the average earnings before they became disabled. Blindness, deafness, terminal diseases, and losses of limbs fall into this category.

States vary when it comes to benefits for spouses and children. Generally, a surviving spouse will get benefits for life if they don’t remarry. Children will receive benefits until they are 18 years old and no longer in school. After that, the checks go to the surviving parent. The compensation will cover some burial costs depending on the state law for the employee as well.

The amount of income or disability benefits will be determined by how much the employee was making at the time of injury and before taxes. Usually, they will receive 60 to 70 percent of what they were making before they got hurt unless it goes over the state’s legal maximum. The income is calculated into a weekly average, and checks are typically sent on a weekly basis.

How to escalate a claim

An employee can contest the way an insurance company is handling their claim by requesting a conflict resolution process with the state. This process is different for every state, but an employee could very well end up in court if they are looking to receive more benefits.

Workers’ compensation is a safeguard for both employees and employers. With it, workers can feel like they are protected on and off the job should injury, illness, or death occur.

Ryan Hanley is the Vice President of Marketing at and the Managing Editor of Agency Nation. He is also a speaker, podcaster, and author of the Amazon best-seller, “Content Warfare.” Ryan has over 12 years of insurance expertise and blogs frequently to help consumers understand complicated insurance topics.

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Have you ever received workers’ compensation? If so, tell us about your experience in the comments or join the conversation on Twitter.

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