What Does Workers Compensation Insurance Cover?

Workers compensation insurance (generally called “workers comp”) helps protect employees and employers from the costs of workplace injuries and diseases. So, what does workers comp cover? It covers medical expenses and lost wages that an employer must pay under the state workers compensation law due to a compensable work-related injury or disease. For employers, it’s almost universally required, and Travelers can help employers manage workplace risk, help employees return to work as soon as medically appropriate and maintain a safe workplace.

With more than 100 years of experience, data and insights in workers comp insurance, Travelers is uniquely positioned to help businesses navigate the complexities of workers compensation.

What is generally included in workers comp coverage?

Understanding what workers compensation insurance covers starts with the basics. Policies pay for benefits that are compensable under the state workers compensation law. Most benefits include:

medical care related to work injuries or diseases; and
replacement of lost wages during recovery.

For employers, coverage can offer:

financial protection from costly/expensive claims; and
compliance with state laws that require insuring workers compensation risk in exchange for limiting or barring civil lawsuits for damages.

Medical expenses for workplace injuries

One of the most common questions people ask is, “Does workers comp pay medical bills?” Generally, workers comp coverage may include doctor visits, hospital stays, prescription medications and rehabilitation services related to a work injury or disease. These benefits help injured employees access the care they need without facing out-of-pocket costs.

Lost wages, disability benefits and vocational rehabilitation 

After an injury, employees may wonder, “Does workers comp pay full salary?” Work comp policies pay the portion of wages required by the applicable state workers compensation law. For many states, the compensation rate is about two-thirds of an employee’s average weekly wage, as defined by state law. Coverage may include:

Indemnity benefits for lost wages, often based on a portion of the employee’s Average Weekly Wage (AWW), with limits set by state law.
Permanent disability benefits for a total or partial permanent loss of function.
Vocational rehabilitation services such as retraining or job placement support to assist with returning to gainful employment.

Understanding workers comp benefits can help set realistic expectations. Travelers can help support return-to-work plans tailored to individual needs.

Employers’ liability coverage and workers comp

Employers’ liability coverage is included in workers compensation policies. While workers comp provides benefits for employees injured on the job, employers’ liability helps protect the business if an employee, their family members, or other third parties that workers compensation laws don’t cover files a lawsuit in court for damages due to the employee’s injury. It may help pay for legal defense, settlements or judgments.

Examples of situations that could potentially result in an employer’s liability claim:

Third-party over actions

An employee is injured by a third party, collects workers compensation benefits, and then sues the third party. The third party then sues the employer, alleging that the employer contributed to the injury.

Loss of consortium

A spouse sues the employer for damages related to loss of family relationship due to the work-related injury or disease of their partner.

Consequential bodily injury

An employee's spouse, child, parent or sibling claims damages alleging that they have been injured because of the employee's injury.

Dual capacity claims

An employer could be held liable in a capacity other than being the injured worker's employer. For example, if a worker is injured by a product manufactured by the worker's employer, the worker could sue the employer in its capacity as a manufacturer.

Who can receive workers compensation benefits?

Eligibility for benefits often depends on how the worker is classified under state law, which can differ significantly across jurisdictions. These distinctions are especially important when evaluating workers comp 1099 rules and determining who qualifies as an employee eligible for workers compensation benefits under the state workers compensation law.

Understanding who can receive workers comp benefits typically starts with employment status and business structure. Most policies automatically include full-time and part-time employees, but sole proprietors, officers, partners and LLC members eligibility varies by state and may require affirmative steps to be included.

Learn how workers compensation laws apply to injured business owners and the differences between employees and independent contractors:

Sole proprietors, officers, partners and LLC members

Coverage for business owners isn’t always automatic. Depending on the state, these roles may be excluded by default or eligible for policy inclusion through a formal election. Understanding how ownership status affects workers comp eligibility is key to ensuring proper coverage and accurate payroll on an employer’s policy.

To learn more, read our article “Workers Compensation Coverage for Business Leaders.”

Employees vs. independent contractors

Workers comp applies to most employees, not independent contractors. Employee classification rules vary by state. Classifying a worker as an independent contractor simply by issuing a 1099 or paying them in cash does not automatically make them an independent contractor. Misclassifying a worker could lead to penalties, claims issues and additional premium when the policy is audited, so understanding who is covered is essential for compliance and proper coverage.

Understand the nuances in “How Does Workers Compensation Apply to Employees Versus Contractors.”

What isn’t covered by workers comp?

Workers compensation provides broad protection, but not every injury is compensable. The injury must arise out of and in the course of employment.

Employers often ask, “What does workers compensation not cover?” The answer depends on state law, but knowing which injuries are not compensable under workers comp helps clarify responsibilities. In some states, injuries caused by the employee’s intoxication, horseplay or a violation of company safety policy might not be compensable.

Additional coverage to add to a policy

Standard workers compensation policies may leave gaps depending on a company’s operations, contracts or workforce. Businesses can strengthen protection with supplemental workers comp coverage, which includes optional endorsements that address specific risks or legal obligations. These additions may include waivers, maritime coverage, alternate employer arrangements and voluntary compensation for nontraditional workers. Some endorsements may be required as part of an employer’s contract with a third-party, while others offer flexibility for unique exposures. While not every injury is covered by workers comp, these enhancements help businesses tailor coverage to their needs and reduce liability. Travelers offers various workers comp endorsements, some of which come at additional cost.

Waiver of subrogation

An insured may have a contractual obligation to provide a waiver of subrogation. This endorsement is used to waive the insurer’s right of recovery against third parties who may be responsible for an injury. There are two types of waivers: blanket and specific.

Blanket waiver

A blanket waiver removes the right to recover from any person or organization to which the insured has signed a written agreement to furnish a waiver.

Specific waiver

A specific waiver removes the right to recover from others for a specified job or contract, and only for those principals designated.

Third-party notice of cancellation

An insured may have contractual obligations to notify third parties when its policy is:

cancelled,
nonrenewed, or
renewed with material changes.

These endorsements provide that the carrier will notify the third parties when this occurs.

Alternate employer

This endorsement is used to provide workers compensation and employers’ liability insurance to an alternate employer for injury to the insured’s employees while in the course of special or temporary employment by the alternate employer.

Voluntary compensation

This endorsement provides the employer with a means to voluntarily offer the equivalent of statutory workers compensation benefits to workers who aren’t subject to state workers compensation laws, such as domestic workers.

Maritime and voluntary maritime

This endorsement provides employers’ liability insurance for injury to masters and crew members of a vessel, for which the employer has maritime exposure that isn’t covered under a Protection and Indemnity Policy. The endorsement also provides coverage for transportation, wages, maintenance and cure.

Voluntary Compensation Maritime Coverage Endorsement

This endorsement provides voluntary workers compensation insurance for masters and crew members of vessels.

Federal Employers’ Liability Act (FELA)

This endorsement provides employers’ liability insurance for interstate railroads.

United States Longshore and Harbor (USL&H) Workers’ Compensation Act

This endorsement provides workers compensation and employers' liability insurance for work subject to the Longshore and Harbor Workers' Compensation Act. The USL&H Act applies to workers injured while engaged in maritime employment on or near navigable waters of the United States.

The following extensions are also available:

Defense Base Act (DBA)

The DBA extends the provisions of the USL&H Act to civilian employees working on overseas military bases or under public works or national defense contracts with agencies of the United States government. Non-U.S. citizens may qualify under the DBA if they are not subject to a waiver granted by the U.S. Secretary of Labor.

Non-appropriated Fund Instrumentalities Act (NFIA)

The NFIA extends the provisions of the USL&H Act to civilian employees working on U.S. military bases in the United States and throughout the world who are not paid with funds appropriated by Congress. These civilians work in facilities operated for the comfort, pleasure and improvement of the U.S. Armed Forces. Examples include the Army and Air Force Motion Picture Service, the Army and Air Force Exchange Service and Marine Corps exchanges.

Outer Continental Shelf Lands Act (OCSLA)

The OCSLA extends the provisions of the USL&H Act to employees of companies working on the Outer Continental Shelf of the United States in the exploration and development of natural resources. This work includes exploration, development, removal or transportation by pipeline of natural resources on the Outer Continental Shelf or fixed structures erected on the Outer Continental Shelf, such as off-shore oil and gas platforms.

Work with Travelers to choose the right workers comp coverage

When evaluating workers compensation coverage, employers should consider workforce size, industry risks and specific business needs. Travelers and its agents help employers address the details that matter: navigating multi-state requirements, confirming classifications and payroll, and adding endorsements for unique exposures. With more than 100 years of workers compensation experience, we combine risk control resources, return-to-work guidance, responsive claims handling and legislative expertise to help businesses build the right coverage and keep operations resilient.

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Care for the employee, confidence for the employer

Employees are at the heart of every business. That's why Travelers is here to help employers keep them safe and support them when accidents happen. Our experienced teams guide both employers and their injured employees through recovery, from getting the right care to returning to work as soon as medically appropriate. In fact, 70% of injured employees return to work within 30 days.

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