Workers comp insurance, as this coverage is generally called, pays for medical care and replaces a portion of lost wages for an employee who is injured in the course of employment, regardless of who was at fault for the injury. When a worker dies as a result of injuries sustained while working, the insurance provides compensation to the employee’s family. Most states have provisions within their work comp laws that exempt certain smaller employers from complying with workers compensation regulations. While these employers may be exempt from providing work comp insurance, they are not exempt from providing compensation benefits to injured employees.
Workers compensation legislation typically takes away the injured employee’s right to file suit against the employer.
In exchange, the employee is assured reasonable compensation for injuries without the need to prove negligence. While the employer is assuming absolute liability for the injury, workers compensation legislation protects the employer from expensive lawsuits and financially ruinous settlements.
Employers that choose to be exempt from work comp legislation also give up the protections afforded by it. Their injured employees would retain the right to bring suit against the employer, and any settlements that are won are only limited by the discretion of judges and juries.
Today employers who fail to provide workmans compensation insurance when mandated also expose themselves to severe civil penalties and fines.