Who pays workers’ compensation benefits?

Workers’ compensation insurance policies are a lot like car insurance. When a company meets the threshold to come under the Workers’ Compensation Act, it is mandatory for employers to purchase coverage. This is much like how we as drivers are required to have insurance coverage in case we cause an accident on the road. 

The State

There are various insurance programs operated by the state that deal with workers compensation claims. These are typically run by a state’s Labor Department and the function is to provide insurance for employers. When dealing with smaller companies, there is a lower number of work-related injuries and many of these companies use workers’ compensation programs operated by the state. The employers have to pay regular premiums and as long as they are paid up, the state foots the bill when there is a claim to be paid out. The labor division handles this program and subsequent payout to employees.

Private Insurance

There are many private insurance companies that offer workers’ compensation policies to companies. This is considered a third-party insurance company, which is entrusted with handling the claim. If there is a dispute or some type of issue with the claim, it is handled by the individual insurance company. Private insurance applies to the workers’ compensation sector much like it does to other areas. Companies pay premiums for this service.


Many large organizations utilize the option of self-insuring. This typically involves a large corporation that has enough assets to cover the cost of a workers’ compensation claim. However, these self-insurance policies generally use a third-party administrator. That still means the company is responsible for paying out a claim. In instances where a company does not have any type of insurance, the company is responsible for paying out the claim. Sometimes self-insured companies will be self-insured up to a certain point and then insurance kicks in. Think of this arrangement like choosing a very high deductible to reduce premiums.

Thresholds For Workers Comp Coverage & Benefits

It should also be noted that not every employer is mandated to have workers’ compensation coverage. In most states, the threshold to require coverage is when a company regularly employs 3-4 or more employees.

The bottom line is that most payouts are not made directly by employers, but through a third-party, most often an insurance company. Injured workers just need to follow the specifics of the filing process in order to receive compensation. If you or a loved one is experiencing any issues or have any concerns with their workers comp benefits or insurance coverage please contact one of our experienced attorneys and we can help you.

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Former Executive Committee Member
Injured Workers’ Advocates

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