Differences Between Workers Compensation & Insurance

Small and large businesses purchase different types of liability insurance to protect existing assets. Workers' compensation and employer liability insurance work together to ensure that employees receive needed medical care in the event of a work-related injury or illness. Differences between the two types of coverage have to do with employer versus employee protections, and how one reinforces the other.

Bodily Injury and Illness

In the United States, workers' compensation laws require businesses to provide monetary relief to employees who are injured on the job, according to the website All Insurance Info. Monetary relief measures require employers to cover all related medical costs and provide for a certain percentage of lost wages. Liability protection for businesses works as a two part system where workers' compensation coverage fulfills the Part One requirements under federal and state laws. Workers' compensation benefits involve injuries that result in temporary or permanent disability, and also provide vocational rehabilitation and death benefit coverage in the form of payments made to survivors for funeral and burial costs.

Employer liability coverage fulfills the Part Two coverage requirement for businesses under federal and state laws. Unlike workers' compensation insurance, employers can choose the amount of liability protection that best suits their business needs, according to All Insurance Info. Liability insurance acts as a type of no-fault coverage that protects employers from being sued by injured employees who utilize the workers' compensation option. In effect, the Part Two protection provided by liability coverage eliminates the need for litigation when employees accept the benefits offered under workers' compensation. As a result, employees relinquish their right to sue an employer for claims related to pain and suffering or loss of family ties due to injury or illness.

Workers' compensation laws vary from state to state in terms of specific coverage requirements, with some states imposing limits on the amount injured employees can receive in litigation cases. Businesses can obtain workers' compensation insurance through licensed private insurance companies or from their state compensation insurance fund. While businesses have the option of selecting the amount of coverage needed for employer liability insurance, state governments do reserve the right to shut down businesses that have no liability coverage. The amount and type of liability coverage needed depends on the types of jobs performed within a business and the level of safety risk associated with each job type. Other provisions for workers' compensation insurance include coverage for employees who travel for business purposes to other states on a regular basis.