Workers’ compensation insurance provides coverage for medical care and a portion of wages lost due to work-related injuries and illnesses. It does not assign liability or fault, meaning the injured employee is not required to prove employer negligence before receiving benefits. In return for these “automatic” benefits, employees covered by workman’s compensation forfeit the right to seek damages through a work injury lawsuit against their employer.
Workers’ comp insurance is mandatory in every state except Texas, where employers can opt-out of coverage but leave themselves vulnerable to work injury lawsuits. Each state has its own unique set of workers’ compensation laws, but they provide the same general types of benefits.
In the event of on-the-job injury or illness, workers’ compensation covers all associated medical treatment. Medical claims can be made for emergency care or regular treatment for less urgent work-related health problems. Based upon the situation, coverage may activate immediately upon injury or require pre-approval from the insurance company.
Emergency Care Claims: In most cases, employees are free to seek immediate emergency services, and the workers’ compensation insurer will cover them without prior clam approval. The employer may tell them to obtain such care from a specific healthcare provider. Regardless, the employee should inform emergency healthcare providers that the injury or illness is work-related (if they are able). If the claim is later denied, the employee may or may not have to cover the cost.
Non-Emergency Care Claims: In cases not requiring urgent medical care, most workman’s comp systems require the employee and their manager to file appropriate forms prior to obtaining covered medical care. The insurance company must deliver an approval/denial decision within a matter of days. Employees with approved claims can obtain treatment through authorized healthcare providers.
When an employee cannot work due to job-related medical problems, workers’ compensation provides partial wage replacement. The injured employee must file the proper claim forms and receive approval before cash benefits can be distributed. Benefits begin after a three to seven day waiting period and only after the claim has been approved.
In most situations, cash benefits are limited to two-thirds (⅔) of the employee’s pre-injury compensation, but the amount varies state-to-state. No program offers total wage replacement, as it could provide a monetary incentive for employees to deliberately sustain injuries at work.
The duration and amount of partial wage replacement depends on the severity of the employee’s disability and the length of time it will persist. Insurance companies evaluate partial disability using the American Medical Association’s Guides to the Evaluation of Permanent Impairment.
Workers' Compensation Cash Benefits
|Temporary Partial Disability (TPD)||
|Temporary Total Disability (TTD)||
|Permanent Partial Disability||
|Permanent Total Disability||
The Federal Government does not count workman’s comp disability benefits as taxable, but some states may.
Cash Benefits and Social Security Disability
An injured worker can receive both workers’ compensation disability and Social Security disability payments concurrently, but the total amount cannot exceed 80% of their pre-injury wages. In the event of an excess, Social Security disability payments are decreased to make the total disability benefit amount equal to 80% of pre-injury compensation.
Social Security retirement benefits are not affected by workers’ comp. In fact, some employees have chosen to retire early in order to transition from Social Security disability to retirement and avoid the 80% cutoff.
In employment-related deaths, workers’ comp provides funeral and burial expenses for all covered employees. For workers with spouses or dependents, it also distributes cash benefits, typically equivalent to what the deceased would have received for total permanent disability. Benefits stop if/when the spouse remarries or dependent recipients reach adulthood.
Vocational Rehabilitation Benefits
Though not available in all states, many workers’ compensation programs provide injured workers with several forms of assistance in returning to the workplace. This may include occupational counseling, job search support, education, or vocational retraining.
Most states require recipients of vocational rehabilitation services to meet certain requirements such as adhering to a plan or not missing appointments. If a recovering worker skips any of these requirements, they may not receive any further vocational assistance.
Benefits Not Included in Workers’ Compensation Coverage
The expenses covered by workmans compensation insurance do not include certain damages commonly associated with personal injury cases or lawsuits. Specifically, injured employees cannot obtain monetary reparations for general damages like pain, suffering, mental anguish or anxiety. For more information on damages and how they contrast with workers compensation benefits, select the appropriate link below.
Workers’ Compensation Settlements
When an injured employee makes a workers’ comp claim, they may not agree with the amount or duration of benefits offered, especially in permanent disability cases. In most systems, the covered employee has the following options:
- Accept the initial offer.
- Request a lump-sum settlement offer.
- Enter into negotiations for a structured settlement.
The initial offer will typically provide weekly or bi-weekly benefits in standardized amounts. Lump sum and structured settlements provide distinct advantages and disadvantages compared to standard benefits.
In lieu of continued weekly or bi-weekly disability payments, the insurance company may offer one bulk payment. Ideally, the amount offered will cover the employee’s medical bills and a portion of lost wages for the expected duration of disability.
In return for this up-front payment, the injured worker may give up the right to any future claims for the same injury. However, some state laws do not allow such a condition in workers’ compensation settlements. You should speak with an experienced personal injury attorney to understand which rules and regulations apply to your workers compensation claim.
Rather than a lump sum payment, a workers’ compensation settlement may be offered in the form of structured payments over time. In this case, the injured party does not give up their right to claim future benefits for the same work-related health problem. If unexpected medical bills crop up later, the injured worker may still be able to file a claim for them.
Most Common Workers' Comp Benefits Covered in Settlements
Permanent Partial Disability: May cover compensation for diminished earning capacity, permanent scarring or disfigurement
Permanent Total Disability: Should include partial wage replacement for life or the maximum duration allowed by law
Past-Due Temporary Disability: Included when the insurance company failed to pay the correct amount for any temporary disability claim, may include penalties for late payments
Medical Expenses: Should account for unpaid medical bills for the work-related injury or illness if included; may be excluded in order to retain rights to future medical claims
In most cases, a workman’s comp judge must review and certify a settlement before it becomes final. If the injured worker has not retained a workers compensation attorney to negotiate on their behalf, the judge will attempt to ensure the amount of money and duration of benefits are fair.
Unfortunately, a judge cannot understand an individual’s situation as comprehensively as a workers compensation attorney or law firm can. Thus, it is in the employee’s best interest to obtain legal representation capable of ensuring the settlement accounts for their comprehensive medical history and any possible future wage loss.
Questions to Ask Your Workers Compensation Attorney
- Does my type of work (agricultural worker, independent contractor, etc.) exclude me from benefits?
- Am I better off seeking a lump-sum or structured settlement versus accepting the insurance company’s initial offer of standard benefits?
- Is it possible that I will receive a smaller amount of money if I don’t accept the insurance company’s first offer?
- If I accept this settlement, am I limited to seeking care from a specific medical provider?
- Will I be able to make future claims if unexpected medical expenses arise?
- How long will I receive cash benefits?
- How will this affect my Social Security disability benefits?
- Does signing this agreement permanently close my case?
- What happens if my case goes to trial?
- Does my case involve a third-party claim, and if so how do I handle that?
- How many workman’s comp cases have you handled, and what percentage of outcomes were better than the client’s initial offers from the insurance company?
Workers’ Compensation Benefits and Settlements Terminology
A settlement agreement that depends on the occurrence of a specific event, most commonly seen when the contingency involves Medicare signing off on the agreement
In a settled workers compensation case, spending account into which all funds earmarked for medical expenses must be deposited; pays for all health care costs until no money remains, after which point Medicare may cover future medical treatment