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Workers’ compensation insurance provides benefits to employees that suffer work-related injuries and illnesses. Employers are required by state law to have workers’ comp insurance for their employees. Each state’s requirements are different. You can find the contact information for state workers’ compensation offices here. The federal government has its own workers’ compensation minimum requirements, which you can learn about here.

Some states exempt certain types of workers from workers’ comp coverage. Whether you are covered may depend on if you are a full-time employee, independent contractor, temporary or seasonal employee, intern, agricultural employee, etc. It is best to contact your state workers’ compensation department to learn more about your coverage.

What does workers’ compensation insurance cover?

Workers’ comp insurance can cover a variety of costs related to a workplace injury or illness an employee sustained, including:

medical costs

Medical costs to treat injuries and illnesses – can be something that happens over the course of years (like carpal tunnel or mesothelioma)

portion of lost wages

A portion of lost wages

long-term care

Long-term care - if you’re disabled (for a long period of time) or permanently and can’t return to work, workers’ comp can pay for medical bills and lost wages

funeral costs

Funeral costs should the worst happen

Does it matter who is at fault?

It does NOT matter who is at fault in order to claim a workers’ comp injury, whether it was the employer’s fault or the employee’s. The only thing that matters is that the injury occurred while the employee was carrying out a work task. Should the employee not have been doing the task for work, the injury would not have happened.

Do you have to be injured at your worksite to be covered?

The employee does not have to be injured at the worksite in order to receive workers’ comp benefits. The employee must have been conducting work tasks at the time of injury in order to qualify. For example, an employee that was driving a company car to the airport to pick up the CEO was injured in a car accident on the way. The injury did not take place at the office, but was work-related, and so would be covered by workers’ compensation.

What exceptions are there to workers’ comp coverage?

workers comp insurance

It is important to note that receiving workers’ comp benefits for any of these situations is dependent on state law, the circumstances surrounding the injury, and insurance plan requirements. Generally speaking, if an injury occurred while an employee was:

  • drunk,
  • using illegal drugs,
  • committing a crime, or
  • knowingly breaking work rules

There is a high chance it will not be covered by workers’ compensation. Other examples where workers’ comp coverage is conditional include when an injury occurs during a lunch break, at a company event, or during a commute to and from work.

Are workers’ comp payments taxable?

No, they are not taxable. Any amounts you receive from a workers’ compensation claim would not be included as income on your tax forms. For more information, refer to this IRS tax guide, page 19 under “other compensation.”

Can you sue your employer for damages if you collect workers’ comp benefits?

workers comp coverage

This depends on the state you are employed in and the circumstances surrounding the injury or illness, but generally it is uncommon for an employee that collects workers’ comp benefits to then be able to sue the employer. Certain exceptions might include if your employer does not have workers’ compensation insurance at the time of injury, or if you are injured by a third party, you may be able sue the third party while also receiving workers’ compensation.

If an employee does not use workers’ comp benefits after an injury or illness and then decides to sue the employer for damages, the rules change. It is best to consult your HR team or workers’ comp insurance provider for more information on your plan specifics, and obtain trusted legal counsel for guidance in handling a lawsuit or workers’ compensation claim.

What are workers’ compensation class codes?

Workers’ compensation insurance plans, cost, and coverage depend on many things, particularly what the job duties are of the covered employees. A truck driver might have more risk than an accountant. In order to categorize work duties, insurance companies use a three or four digit code to identify the work performed so they can accurately estimate the risk associated with that work. This process is called underwriting a business. Generally the workers’ comp class codes are standardized within the state lines, but not all states use the same codes. However, several states use the National Council on Compensation Insurance (NCCI) codes so their codes are effective/can be used across state lines.