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Workers' Compensation Insurance

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What Is Workers' Compensation Insurance?

Workers’ compensation insurance was the first social insurance instituted in the United States. It came into existence to protect both businesses and employees after a workplace injury. This is sometimes referred to as the grand bargain. Modern workers’ compensation insurance laws were created as a compromise between workers and their employers with the goal to quickly resolve work-related injuries without lawsuits. Employees receive fast compensation and give up the right to pursue lawsuits. This protects employers from expensive lawsuits that could otherwise disrupt their business.

Workers’ compensation insurance covers an injured employee’s medical expenses, lost wages for missing work, permanent impairment benefits, and in worst-case scenarios, survivor benefits. For any organization with employees, this is one of the most important insurance coverages.

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Everything You Need To Know About Workers' Compensation Insurance


Who needs workers’ compensation insurance?

No matter what business you operate in, workplace injuries and illness are possible.

While workers’ compensation insurance laws vary between states, most companies that hire employees are legally required to maintain some scope of coverage. Most small businesses will need a workers’ compensation insurance policy in place before hiring their first employees. There is a small list of exceptions in different states. For example, dairy farmers in Vermont are not required to carry a workers’ compensation insurance policy.

Even in cases where workers’ compensation insurance policies are not required by law, carrying this policy is a benefit to both business owners and employees. A work-related injury with significant medical costs could be devastating to any business.

Is workers’ compensation insurance required by law?

Each state has different requirements and laws that dictate specific benefits. In most cases, businesses are required to maintain a workers’ compensation insurance policy by the time they put their first employee on the payroll. This does not typically include independent contractors.

Additionally, each state has different guidelines related to specific industries. Some companies will have different requirements due to the work they conduct. It is important to reach out to a qualified insurance agent to learn about your state’s laws.


What does workers’ compensation insurance cover?

A workers’ compensation insurance policy can help cover expenses from workplace injuries including medical expenses, employee lost wages, vocational rehabilitation, permanent injury benefits, survivor benefits, and legal fees. The policy is intended to cover a business’s financial liability under workers’ compensation laws within the states in which they operate. The coverage details will vary from state to state.

Medical Expenses

Medical expenses will vary from injury to injury, but a workers’ compensation insurance policy will typically cover all medical expenses that are related to the work injury and allowed by the state in which you operate. This typically includes physician evaluations, immediate hospital bills, surgery, ongoing medical treatment, and physical therapy or rehabilitation charges.

For example, if your office manager starts getting work-related wrist pain and their physician diagnoses them with carpal tunnel, workers’ compensation insurance will pay for the doctor visits, follow-up treatment, and suggested physical therapy.

Lost Wages

When an injury keeps an employee from being able to do their work, workers’ compensation can help pay for a portion of their lost wages until they are physically able to return to their job duties. This allows employees to take the appropriate amount of time to heal without risking additional injuries from trying to return to work before they are fully ready.

From the previous example, if the office manager needed time off for surgery to alleviate their carpal tunnel, workers’ compensation insurance would pay a portion of their salary while they recovered and were unable to work. The percentage of salary covered varies in each state. For example, in Vermont, it is most common to receive 66.67% of the average weekly wage.


When an injury is serious enough to prevent an employee from ever returning to their previous job, workers’ compensation insurance can pay for that employee to learn new skills. This will allow them to enter a new field of work that better suits their abilities after a substantial injury.

For example, an electrician has ongoing work-related leg pain that is preventing them from going out into the field. A workers’ compensation insurance policy can cover computer skill courses to transition them into an office role.

Permanent Injury

If a workplace injury is serious enough that an employee has a permanent impairment, workers’ compensation insurance can provide long-term disability benefits. These benefits vary by state of operation and severity of the injury.

Survivor Benefits

In the unfortunate case that an employee passes away in a work-related incident, workers’ compensation insurance will cover funeral expenses and ongoing financial assistance to their family.


Depending on policy details, workers’ compensation insurance can also provide business owners with coverage from lawsuit expenses resulting from employee workplace injuries. These can include attorney fees, court costs, and potential settlements or judgments at the end of a trial.

What does workers’ compensation insurance NOT cover?

Generally, workers’ compensation insurance will not cover workplace injuries to independent contractors, if the employee is found negligent, or if they went against established company safety policies. Some scenarios that workers’ compensation insurance will not cover are:

  • Injuries due to intoxication
  • Customer or client injuries
  • Injuries due to self-started altercations
  • OSHA fines
  • Cost to hire replacement labor
  • Injuries sustained in the act of a crime
  • Self-inflicted injuries
  • Injuries to independent contractors

How much does workers’ compensation insurance cost?

Since workers’ compensation insurance rates are state-regulated, they can vary greatly within each state. To get an exact cost you will need to speak to an insurance agent who can understand the unique aspects of your business.

The cost of workers’ compensation insurance depends on several variables, including:

  • The state(s) in which your business operates
  • Number of employees & size of payroll
  • Industry of operation and specific job assignments of your employees
  • Past claim history

Often, more physical work exposes staff to an elevated risk of injury and will result in higher costs. If most of your employees are working desk jobs, you may pay less than companies that operate at physical job sites.

To get a free custom quote on your workers’ compensation insurance contact one of our licensed insurance agents.

How much workers’ compensation insurance coverage do I need?

Workers’ compensation insurance is driven by your payroll exposures. The higher your payroll, the more likely your business is to have a workers’ compensation insurance claim at some point. This means companies with larger payroll will pay greater workers’ compensation insurance premiums.


Can business owners exclude themselves from their workers’ compensation insurance policy?

Owners and officers do have the ability to exclude themselves from the company’s workers’ compensation insurance policy. Most owners do not have large exposure to a workplace injury and therefore exclude themselves from this policy.

Do I need workers’ compensation insurance if I am a sole proprietor?

It is not common for self-employed workers to carry workers’ compensation insurance, though occasionally when bidding on contracts or obtaining special licensing there are insurance requirements that need to be met before being considered. When you are self-employed it is important to maintain at least one type of insurance that will cover workplace accidents that personal health insurance will not cover. Typically, sole proprietors will choose to purchase disability insurance or less often workers’ compensation insurance.

Workers’ compensation insurance is not required if you are self-employed or an independent contractor unless stated in specific business contracts. However, a policy can provide additional coverage to yourself, so you do not find your small business in jeopardy after an accident.

What is employers’ liability insurance?

Employers’ liability insurance is typically packaged with workers’ compensation insurance. It protects the employer from workplace injury-related lawsuits that claim an employer’s gross negligence caused the injury.

What is the difference between workers’ compensation and general liability insurance?

Workers’ compensation and general liability insurance both provide financial coverage for injuries that are associated with your business. Workers’ compensation insurance pays for medical and lost wage expenses due to employee injury or illness while general liability insurance covers clients and customers.

Learn more about general liability insurance.

How do I make a workers' compensation insurance claim?

Most carriers have online claim reporting capabilities, or you can call their toll-free claims reporting phone number. At Winooski Insurance, we are always available to assist you through the claim reporting process. Our clients can rest easy knowing our experienced agents are ready to help when needed.

View a list of our partner carriers and instructions on where to file a claim with each.

Why should I get workers' compensation insurance through an independent agency?

Winooski Insurance has been an independent insurance agency for almost 40-years. During this time, we have created long-term relationships with a multitude of insurance partners which allows us to present you with a broad range of coverage options at competitive rates. We’re committed to helping you address your unique requirements.

What Other Types Of Insurance Should Your Business Consider?

Business Owner's

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General Liability Insurance

Protect your business from common third-party injuries, damages, and risks.
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Commercial Property Insurance

Safeguard your company's property and inventory from damage or destruction.
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What Our Customers Are Saying

The level of service and professionalism I’ve received from Jeff and the experienced professionals at Winooski Insurance is unparalleled. I’m grateful to have been referred to Winooski Insurance and truly feel like I have a business partner, not just an insurance company.

Cherian Philip, CFO
Aspenti Health

Cherian Philip, CFO

The entire team at Winooski Insurance have done an outstanding job of providing insurance coverage for my company. This is not always easy, as each project has to be reviewed by Winooski Insurance to verify that we have the required coverages.

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Professional Construction Inc.

David Bogue, President

I have personally and professionally used Winooski Insurance for over 15 years. The staff is efficient, the service is excellent, and they work hard to keep the premiums low. I highly recommend Winooski Insurance!

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Draper and Kramer Mortgage Corp.

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