Workers compensation insurance covers workers' medical bills and some lost wages if they can't work due to job-related injuries. This can include the costs of diagnosis, medical treatment, disability payments for both temporary and permanent injuries, retraining if needed and death benefits for dependents. Most states require employers to have workers comp insurance.

Rules on which businesses need to carry workmans comp vary:

  • Most states require workers comp insurance, often depending on the number of employees.
  • States often have exceptions to workers comp laws, such as farm workers, domestic workers and independent contractors.
  • Federal employees are under different workers comp rules.
  • Rules can depend on the industry, such as railroad workers and longshoremen.

Things workers compensation can pay for

Types of injuries generally covered by workers compensation

Workers comp insurance can cover a wide range of injuries and causes -- as long as they are work-related. Obvious work-related injuries like falling off a ladder in a stockroom are covered, but so are problems you may not have thought of:

  • Carpal tunnel and other "repetitive stress" injuries from computer work or other tasks.
  • Chronic back pain developed over long period of time due to job tasks.
  • Medical problems due to work conditions, such as lung disease or stress-related stomach problems.

An injury doesn't have to happen at work in order to be covered by workmans comp, it only has to be work-related. So if someone is injured while traveling for business, running an errand for work or even at a company holiday party, they can be covered by workers compensation insurance.

Having workers compensation insurance generally also means that workers can't sue their employers for work-related injuries.

Workers compensation class codes

Your business will be given a workers compensation classification. These codes are from either a state rating bureau or the National Council on Compensation Insurance (NCCI). The International Risk Management Institute has a list of what each state uses. Employees will be classified based on job duties, and the classifications will affect your workers comp rates.

One of the most important things a business owner can do is prevent employee injuries, especially if you want to hold down your workers comp insurance cost.

The workers compensation system "rewards employers within their classification that have a good experience record with regard to injuries and costs," says Trey Gillespie, assistant vice president for workers compensation, commercial lines for the Property Casualty Insurers Association of America, a trade group. "It shifts responsibilities more on to businesses within the classification that have a worst track record with injuries and the cost of those injuries," he says.

What's usually not covered by workers compensation insurance

  • Injuries someone gets while intoxicated or using illegal drugs.
  • Self-inflicted injuries.
  • Injuries someone gets when not working.
  • Injuries someone gets while doing something that violates company policy.
  • Pain and suffering compensation.

Industries with the highest rates of nonfatal workplace injuries and illness

Industry Incidence rate per 100 full-time workers
Nursing and residential care facilities (state government) 13.7
Veterinary services (private industry) 12.3
Truss manufacturing (private industry) 10.2
Police protection (local government) 10.2
Fire protection (local government) 9.5
Heavy and civil engineering construction (local government) 9.1
Motor home manufacturing (private industry) 8.7
Manufactured home (mobile home) manufacturing (private industry) 8.6
Travel trailer and camper manufacturing (private industry) 8.6
Beet sugar manufacturing (private industry) 8.5
Cut stock, resawing lumber, and planing (private industry) 8.5
Skiing facilities (private industry) 8.5
Hospitals (state government) 8.2
Other nonferrous metal foundries (except die-casting) (private industry) 7.8
Ambulance services (private industry) 7.8
Wood container and pallet manufacturing (private industry) 7.7
Light truck and utility vehicle manufacturing (private industry) 7.7
Correctional institutions (state government) 7.7
Used household and office goods moving (private industry) 7.6
Scheduled passenger air transportation (private industry) 7.4
Couriers and express delivery services (private industry) 7.4
Recreational and vacation camps (except campgrounds) (private industry) 7.4
Fruit and tree nut farming (private industry) 7.3
Frozen cakes, pies, and other pastries manufacturing (private industry) 7.3
Truck trailer manufacturing (private industry) 7.3
Interurban and rural bus transportation (private industry) 7.3
Source: Bureau of Labor Statistics, 2016, based on highest rates for total cases, injuries and illnesses