---
title: "Workers' Compensation Insurance: What It Pays | Riskado"
description: "Workers' compensation insurance is employer-paid coverage for job injuries and illness. See what it pays, what the Information Page shows, and what to ask."
url: "https://riskado.com/insurance-terms/workers-compensation-insurance/"
lang: "en"
published: "2026-07-18"
modified: "2026-10-01"
image: "https://riskado.com/og/default.jpg"
alternates:
  es: "https://riskado.com/es/terminos-de-seguros/seguro-de-compensacion-para-trabajadores.md"
---

# Workers' compensation insurance

[Business](https://riskado.com/business-insurance/) · Updated Oct 1, 2026

Workers' compensation insurance is employer-paid coverage for work-related employee injuries, illnesses, disabilities, and deaths. It generally pays required medical care, rehabilitation, wage-replacement, and death benefits under state law while limiting the employer's exposure to employee lawsuits. Benefits, covered workers, and the employer requirement depend on the state and policy.

Also called: workers compensation, workers comp, worker's compensation, workers' compensation

[Workers' compensation insurance guides](https://riskado.com/workers-compensation-insurance/)

Workers' compensation insurance is paid for by the employer, not the employee, and it responds when a worker is hurt or made ill by the job. The employer pays the [premium](https://riskado.com/insurance-terms/premium/) or qualifies as a self-insurer, according to the [NAIC (opens in a new tab)](https://content.naic.org/cipr_topics/topic_workers_compensation_insurance.htm). If you are reading a quote, a renewal, or a certificate, check the [policy](https://riskado.com/insurance-terms/policy/)'s Information Page, the states listed under Item 3.A, the covered classifications, the payroll figures, and any [endorsements](https://riskado.com/insurance-terms/endorsement/), because the exact benefits and requirements depend on the state and the policy.

## How the wage benefit works

Workers' compensation is the state benefit system, and the insurance is how an employer funds it. Part One of the standard policy pays the benefits that state law requires, according to the [California Department of Insurance (opens in a new tab)](https://www.insurance.ca.gov/01-consumers/105-type/95-guides/09-comm/WorkersCompensation.cfm). Wage replacement is usually a percentage of average wages, not full pay. In New York the rate is generally two-thirds of the average weekly wage, with a maximum of $1,281.50 a week for accidents from July 1, 2026 through June 30, 2027, according to the [New York Workers' Compensation Board (opens in a new tab)](https://www.wcb.ny.gov/content/main/Workers/ScheduleMaxWeeklyBenefit.jsp). The $1,500 wage below is an example.

Illustrative New York weekly wage benefit

Hover or tap a row to highlight it.

| Item | Amount |
| --- | --- |
| Average weekly wage | $1,500 |
| Two-thirds calculation ($1,500 x 2/3) | $1,000 |
| Weekly maximum | $1,281.50 |
| Weekly benefit paid | $1,000 |
| Wage not replaced ($1,500 minus $1,000) | $500 |

Medical treatment for the accepted work injury is paid separately under the [claim](https://riskado.com/insurance-terms/claim/).

## Options and what each changes

The main variations are covered states, employer-liability [limits](https://riskado.com/insurance-terms/limit-of-liability/), payroll classification, and pricing.

- **Part Two, employers' liability.** It has its own dollar limits and is separate from statutory Part One benefits. One state rating bureau lists standard limits of $100,000 for [bodily injury](https://riskado.com/insurance-terms/bodily-injury-liability/) by accident, $100,000 per employee for disease, and $500,000 per policy for disease, with higher limits available for added premium, according to the [Pennsylvania Compensation Rating Bureau (opens in a new tab)](https://pcrb.com/manuals/workers-compensation-manual/section-1-underwriting-rules/rule-viii-limits-of-liability/).
- **Part Three, Other States.** It extends coverage to certain other states listed on the Information Page, and it does not replace full coverage where a state requires that state under Item 3.A.
- **Payroll and classification.** Premium reflects payroll, number of employees, type of work, and workplace safety history, according to the [NAIC (opens in a new tab)](https://content.naic.org/consumer/small-business.htm). A [Texas Department of Insurance (opens in a new tab)](https://www.tdi.texas.gov/WC/regulation/rcomp.html) 2026 example prices a roofing class at 2.919 per $100 of payroll (1.946 times a 1.50 multiplier), so $100,000 of payroll comes to $2,919 before adjustments, taxes, fees, minimums, or audit changes.
- **Audit.** The final premium can change after audit if actual payroll, classifications, or operations differ from what the deposit premium used.

Health insurance generally covers non-work-related care, disability insurance generally covers non-work-related disability, and general liability generally addresses claims from customers, visitors, and other third parties, according to the [NAIC (opens in a new tab)](https://content.naic.org/consumer/small-business.htm). A 1099 label does not by itself decide whether a worker is covered, because state agencies apply their own employee and contractor tests, according to the [New York Workers' Compensation Board (opens in a new tab)](https://www.wcb.ny.gov/content/main/coverage-required-wc.jsp).

## Where you meet it

Workers' compensation appears mainly in a business workers' compensation and employers' liability policy, not in personal auto, life, health, pet, condo, or renters insurance. You will see it in:

- a business insurance quote, proposal, or binder,
- the Information Page or Declarations Page, and Parts One, Two, and Three of the policy,
- the premium, classification, payroll, and audit provisions,
- state-specific endorsements and a renewal notice,
- a certificate or proof-of-coverage document,
- a claim letter or benefit notice.

One exception is in New York, where [Insurance Law § 3420 (opens in a new tab)](https://www.nysenate.gov/legislation/laws/ISC/3420) requires certain homeowners and personal liability policies on one-to-four-family owner-occupied homes to cover employees who work in and around the residence less than 40 hours per week, subject to statutory exceptions. For other coverages a small business may discuss with an agent, see [What Insurance Does a Small Business Need](https://riskado.com/what-insurance-does-a-small-business-need/).

## What Connecticut and New York require

In Connecticut, [Conn. Gen. Stat. § 31-284 (opens in a new tab)](https://www.cga.ct.gov/current/PUB/chap_568.htm#sec_31-284) requires an employer to secure workers' compensation. Unless it proves solvency and financial ability to pay benefits directly, the employer must insure through an authorized insurer, file acceptable security, or use an approved combination. [Conn. Gen. Stat. § 31-275 (opens in a new tab)](https://www.cga.ct.gov/current/PUB/chap_568.htm#sec_31-275) supplies the employee and employment definitions. Total-incapacity benefits are 75 percent of average weekly earnings after specified tax and FICA deductions, under [Conn. Gen. Stat. § 31-307 (opens in a new tab)](https://www.cga.ct.gov/current/PUB/chap_568.htm#sec_31-307), subject to the maximum weekly rate. For small-business context, see [Connecticut Small Business Insurance](https://riskado.com/connecticut-small-business-insurance/).

In New York, [Workers' Compensation Law § 50 (opens in a new tab)](https://www.nysenate.gov/legislation/laws/WKC/50) requires an employer to insure through the New York State Insurance Fund or an authorized private carrier, or to prove it can self-insure. Sections [2 (opens in a new tab)](https://www.nysenate.gov/legislation/laws/WKC/2) and [3 (opens in a new tab)](https://www.nysenate.gov/legislation/laws/WKC/3) set the broad coverage requirement, and [section 51 (opens in a new tab)](https://www.nysenate.gov/legislation/laws/WKC/51) requires a posted notice of coverage. New York also bars employers from asking employees to pay for the coverage, and deducting the cost from wages is a misdemeanor, according to the [Workers' Compensation Board (opens in a new tab)](https://www.wcb.ny.gov/content/main/Employers/workers-compensation-insurance.jsp).

## Questions to ask your agent or insurer

1.  Which states are listed under Item 3.A, and do my employees work in any other states? Part One follows the laws of the listed states, and other-state work may need statutory coverage or an Other States endorsement.
2.  Which employee classifications and payroll amounts set the premium? These are core premium inputs, and an audit can change the final premium.
3.  Are owners, officers, members, family members, independent contractors, or subcontractors included or excluded? State law can define employee status differently from tax or contract labels.
4.  What are the Part Two employers' liability limits, and are higher limits available? Part Two has separate dollar limits and is not the same as statutory Part One benefits.
5.  What must the employer and employee do right after an injury or occupational illness? Notice, medical treatment, claim forms, and reporting deadlines come from state law and can affect claim handling.

## Frequently asked questions

### Does workers' compensation pay full wages?

Usually not. Wage benefits are commonly a statutory percentage of average wages, subject to maximums, minimums, and eligibility rules. In Connecticut it is 75 percent of average weekly earnings after specified deductions, so the employee may receive less than ordinary gross pay.

### Is it required for every business?

It depends on state law, business type, worker status, and exemptions. Most states require coverage for most employers, while Texas lets most private employers choose not to carry it, and a Texas employer that opts out must provide notices and loses important protections against employee lawsuits, according to the [Texas Department of Insurance (opens in a new tab)](https://www.tdi.texas.gov/pubs/consumer/cb030.html).

### What is the difference between workers' compensation and employers' liability?

Part One pays the benefits state law requires. Part Two addresses certain employee injury or disease lawsuits outside the workers' compensation system, up to its stated dollar limits.

## Related terms