Workers Compensation Insurance.
In plain English
Workers compensation insurance, often called workers comp, covers your employees when a work-related injury or illness happens. It pays their medical treatment and a portion of the wages they lose while recovering, and in serious cases it pays disability or death benefits. In return, the employee generally gives up the right to sue you over the injury, which protects your business too. Most states require this coverage once you have employees, and the rules and rates are set at the state level, not federally.
01Why it matters
In most states, having even one employee without required workers comp can bring steep fines and personal liability for the injury, so skipping it is one of the more dangerous corners a small employer can cut.
02The math, step by step
A warehouse employee strains their back lifting a box and needs $9,000 in treatment plus six weeks off work. Workers comp covers the medical bills and pays a share of the wages they miss, so the worker is cared for and you are not sued. What you pay for the policy is based on your payroll and the riskiness of the job, set using your state's rates, so check the rates with your state workers comp board.
03What this is NOT
Health insurance covers an employee's medical needs in everyday life and the employee usually shares the cost. Workers comp only covers injuries and illnesses caused by the job, fully on the employer's dime, and also replaces lost wages, which health insurance does not.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
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