Workers' Compensation and Employers Liability
Worker's compensation benefits compensate workers who are injured in the course of their employment. Most workers compensation laws are required for all employers covered under the law. The full cost of providing workers compensation benefits is absorbed by the employer.

The five basis principles upon which worker's compensation laws are based include:
1) Employer must purchase & maintain workers compensation insurance
2) Benefits are paid periodically not in lump sum
3) Employee gives up the right to sue the employer in exchange for the benefits
4) Employees cannot be required to contribute to workers compensation premiums
5) The laws impose "Absolute Liability" on the employer for all injuries to the employee while working in his/her occupation. Negligence by the employee is even covered.

Benefits & Taxation

  • Medical expenses without limitation
  • No deductibles or coinsurance
  • Disability income with very short waiting periods
  • Payments between 60 to 70% of average weekly income
  • Death benefits payable to family members
  • Unlimited rehabilitation benefits
  • Workers compensation benefits are received free of income taxation

Practice Question:
Which of the following are correct statements concerning the workers compensation system?
I. Benefits received are tax-free
II. Employees must fund the workers compensation program thru union dues
III. Disability income payments typically have a 180-day waiting period
IV. If the employee was "goofing off" by playing a practical joke and was injured on the job, they would need to file a claim under their medical insurance

A. I only
B. I and II only
C. I, III, and IV
D. I, II, III, and IV

Answer: A
The only correct statement is that workers compensation benefits are received tax-free by the employee with a payment on average of 2/3 of their normal pay. Workers compensation is funded by the employer only, has waiting periods of short durations (typically less than 30 days), and covers negligent acts of employees while at work.

Employer's Liability Coverage
These policies also provide Employer's Liability coverage that protects the company in the event that an employee alleges that the employer's negligence or failure to provide a safe workplace was the cause of the employee's injury or illness. (Protects against unsafe working conditions)


Introduction to Health Care Insurance

Related Articles
  1. Financial Advisor

    How Do Workers' Compensation Benefits Work?

    What you need to know about Workers' Compensation benefits.
  2. Investing

    Who's Most Likely to Get Wall Street Bonuses?

    See what areas of finance were most likely to get you a bonus last year.
  3. Retirement

    6 Benefits You're Required by Law to Offer Your Employees

    Learn about the benefits that a business must offer to employees, such as family and medical leave, as well as various forms of insurance coverage.
  4. Retirement

    How Non-Qualified Deferred Compensation Plans Work

    These tax-advantaged retirement savings plans have their pros and cons, and employers and employees must follow strict guidelines.
  5. Managing Wealth

    Benefits of Deferred Compensation Plans

    Understand the difference between a qualifying or nonqualifying deferred compensation plan. Learn about the benefits of a deferred compensation plan.
  6. Trading

    Evaluating Executive Compensation

    Find out how to determine whether a CEO is being overpaid.
  7. Personal Finance

    What to Know About Non-Qualified Deferred Compensation Plans

    There are pros and cons to employer non-qualified deferred compensation plans.
  8. Financial Advisor

    What Kind of Insurance Do RIAs Need?

    Advisors spend a lot of time discussing insurance with clients but they also need to consider their own coverage needs as small-business owners
  9. Managing Wealth

    7 HR Basics for Small Businesses

    Whether or not you are a fan of human resources, every employer needs to know the answers to these questions.
  10. Financial Advisor

    Life Insurance Plans to Help Your Small Business Retain Employees

    How to use and design cash value life insurance plans as an incentive to help attract and retain key employees.
Frequently Asked Questions
  1. How can I purchase stocks directly from a company?

    There are a few circumstances in which a person can buy stock directly from a company. The following is meant to cover some ...
  2. How do university endowments work?

    Endowments represent money or other financial assets that are donated to universities or colleges. The sole intention of ...
  3. Is it possible to take the Series 6 exam without being sponsored?

    Unfortunately, the answer to this question is "No." The Financial Industry Regulatory Authority or FINRA (previously the ...
  4. What is the difference between a non-recourse loan and a recourse loan?

    The essential difference between a recourse and non-recourse loan has to do with which assets a lender can go after if a ...
Trading Center