Workers' Compensation Insurance

What is workers' comp insurance?

Workers’ compensation insurance, sometimes known as workman’s comp insurance, is a state-mandated insurance program that provides medical, disability, survivor, burial, and rehabilitation benefits to employees who are injured or killed due to a work-related injury or illness.

In nearly all states and with few exceptions—businesses are required by law to carry workers’ compensation coverage.


More than three-quarters of small businesses overpay for workers' comp coverage.

How does workers’ comp protect small businesses?

People protection

Workers’ comp helps businesses care for an injured employee by supplementing medical and rehabilitation bills and by helping offset an injured employee’s lost wages.

Financial protection

Workers’ comp helps protect the business from significant financial loss and from being sued by an injured employee. It can also limit other monetary disruptions to the business.

Legal protection

Workers’ comp can help a small business meet state-mandated laws and workers’ comp requirements so they can avoid sentencing or paying fines for non-compliance.

What does workers’ compensation insurance cover?

Illness or injury

In the case a team member becomes ill or is injured due to their work, workers’ compensation helps cover them for related medical care and economic losses.


An injured team member is also covered for wage replacement associated with time off due to disabilities. The common level of wage replacement is 2/3 of your team member’s wages.

Death benefits

If someone dies in a work-related incident, death benefits may be paid out to their family. These benefits offer financial support when an employee’s family needs it the most.

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Workers’ Comp: Frequently Asked Questions

How does workers' comp insurance work?

Each state administers its own workers’ comp program through a commission or board, meaning each state operates differently. Typically these state agencies ensure businesses comply with workers’ comp laws, collect relevant accident information, and make final decisions on cases.

In most states, employers must maintain records of any accidents, report accidents to state agencies, and inform their insurer of any accident within a specified timeframe.

Businesses that are protected by workers’ comp can easily request a Certificate of Insurance to show proof of coverage if needed. For some businesses, this is particularly important because they may be required to provide proof of insurance before any work can begin. This is common in the construction industry, for example.

When a business buys a policy, the premium (price) is estimated. To ensure the correct premium is ultimately charged, insurers will perform an audit after the most recent policy period has ended. Insurers look back at the prior period to verify that the upfront pricing was accurate. If there are any material differences in the business risk or makeup of the workforce, the insurer can collect more premium or provide a credit. Learn more.

What does workers’ comp cover?

Workers’ comp covers the damages experienced by a team member who is injured on the job. Both medical care and economic loss, such as lost wages, are often covered.

There are no co-pays that team members will need to pay when it comes to workers’ compensation insurance.

It is common for states to have treatment and test guidelines, which outline the max payment that will be covered for a given injury.

Many states have a limit on the number of weeks for which benefits can be paid for a temporary disability. As opposed to a permanent disability, team members eventually recover from temporary disabilities.

If a team member dies in a work-related accident, their family may be entitled to death benefits.

What are examples of injuries that are covered and not covered?

Typically covered:

  • Physical injuries, including hearing loss and carpal tunnel syndrome

  • Pre-existing conditions worsened by the work environment

  • Workplace slips, trips, or falls

  • Injuries caused by a workplace hazard, such as a falling ceiling tile

Not typically covered:

  • Injuries suffered while not at work

  • Self-inflicted injuries

  • Injuries suffered while in violation of company policy

  • Injuries from committing a crime

How does workers' comp benefit business owners?

For business owners, workers’ comp protects your company from being sued by employees. It reduces the risk of a crippling financial loss in the case of a serious accident involving your team members. Workers’ comp is also legally required in almost every state and situation. For some, not having workers’ comp can result in large fines or time in prison.

Any team members who are covered by workers’ comp can receive financial protection if they are harmed while performing regular work duties.

How does workers' comp work in each state?
What is a class code?

Insurers use a standardized system of class codes to categorize the type of work someone does. For example, the class code 8017 is a retail store employee. Look up class codes.

What is the National Council on Compensation Insurance (NCCI)?

The NCCI is an insurance rating and data collection service for workers’ comp. It is a non-profit organization that recommends rates to insurers. To do this, NCCI collects and analyzes a wide range of workers’ comp information. They produce guidance manuals for most (but not all) states to define classification codes and experience modification ratings.

The states that are not part of the NCCI are CA, DE, IN, MA, MI, MN, NC, ND, NJ, NY, OH, PA, WA, WI, and WY.

What does it mean when people say workers' comp is an auditable policy?

When first purchasing a workers’ comp policy, the premium (price) is based on the estimated payroll over the period the policy will cover. To ensure the policyholder is paying the correct premium, a “premium audit” or “payroll audit” is conducted after the policy period has ended. This audit can result in the policyholder needing to pay more or less for the policy—if there’s a difference between the actual and estimated premium. The insurer will reach out to the policyholder to conduct the audit and may ask about the duties of different team members or request payroll documents.

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