How Does Workers' Compensation Insurance Work?

All states have laws requiring employers to provide benefits to employees who are injured on the job. Workers' compensation laws differ in every state, but they all aim to cover the cost of workers' on-the-job injuries and job-related illnesses.

How Workers' Compensation Works

Employers pay a premium to an insurer or a state fund in exchange for workers' compensation benefits.

Premiums are calculated based on:

  • Job Classifications
    The types of jobs performed in a company. A company that employs roofers pays a higher premium than a company that employs accountants, because the risk and frequency of injury is greater for a roofing employee. Job classification rates are mandated by the state.

  • Annual Payroll
    The salaries of all employees performing a given job at the company.

  • Previous Claim Activity and Experience
    The company’s history of injuries or illnesses that required medical coverage. A company can improve this aspect by implementing loss prevention measures.

The best way for employers to save on their workers' compensation premiums is to adopt a safety-first culture and prevent injuries before they happen.

If an employee is injured on the job, the employer's workers' compensation insurance will respond.

The information and descriptions on this site are general in nature. The coverage afforded for a particular loss depends on the specific facts and the terms, exclusions, and limits of the actual policy. Nothing on this site alters the terms or conditions of any policy, as the policy controls coverage. Coverage options, limits, discounts, deductibles, and other features are subject to underwriting criteria, state availability, and effective dates. Coverage provided and underwritten by NJM Insurance Company and its subsidiaries, 301 Sullivan Way, W. Trenton, NJ 08628.