Everything You Need to Know About Workers’ Compensation

Mark Vincent Ellema
2 minutes ago
6 min read

Workers’ compensation insurance is one of those topics every business owner knows they need… yet few truly understand until something goes wrong. But here’s the truth:

Accidents don’t schedule appointments. They show up unannounced—and the right workers’ comp policy is what stands between your business and financial disaster.

This guide breaks down every important thing you need to know, written simply, humanly, and with enough detail to make you feel confident, not overwhelmed.

What Is Workers’ Compensation? (In Simple Terms)

Workers’ Compensation—often called workers’ comp—is an insurance policy that pays for:

Medical expenses
Lost wages
Disability benefits
Rehabilitation
Survivor benefits (if an employee passes away)

…when an employee is injured or becomes ill because of work.

It protects both sides:

For employees:

They get medical care and a source of income while recovering—without needing to prove fault.

For employers:

You’re protected from lawsuits that could wipe out your business.

Workers’ comp is mandatory in most states, including Connecticut.

Why Workers’ Compensation Exists (The Real Purpose)

Workers’ compensation was created with one goal:➡️ To create a fair, predictable, and fast way to handle workplace injuries.

Before workers’ comp, workplace injuries often meant lengthy court battles. Today, the system ensures:

Employees are protected automatically
Businesses stay financially stable
Legal disputes are minimized
Workplaces are safer overall

It’s one of the most important protection systems in the modern workforce.

Who Needs Workers’ Compensation?

In Connecticut (and most states), you typically need workers’ comp if:

You have one or more employees
You hire full-time, part-time, or seasonal workers
You use subcontractors that could be classified as employees
You run a construction business
You hire family members (they count as employees in many cases)

Sole Proprietors & LLCs

Some states allow sole proprietors to exempt themselves, but if they hire even one person, coverage becomes mandatory.

Independent Contractors

Even if someone is labeled a 1099 worker, the law might still classify them as an employee. (Misclassification is one of the biggest penalties businesses face.)

What Workers’ Compensation Covers

Workers’ comp covers nearly everything associated with a work-related injury or illness, including:

1. Medical Treatment

Emergency care
Doctor visits
Surgeries
Hospital stays
Medication
Imaging (X-ray, MRI)
Medical supplies
Specialist care

2. Rehabilitation

Physical therapy
Occupational therapy
Chiropractic care
Vocational rehab
Job retraining

3. Wage Replacement

Employees receive a portion of their weekly income while unable to work:

Temporary Total Disability (TTD)
Temporary Partial Disability (TPD)
Permanent Total Disability (PTD)
Permanent Partial Disability (PPD)

This helps injured employees stay afloat financially.

4. Disability Benefits

If an employee suffers a long-term injury or permanent impairment, they may qualify for structured disability payments based on state guidelines.

5. Death Benefits

If a worker passes away due to a job-related incident, workers’ comp covers:

Funeral expenses
Ongoing support for dependents
Income replacement for the surviving spouse or children

What Workers’ Compensation Does NOT Cover

Workers’ comp is generous—but not unlimited.

It typically does not cover:

Injuries sustained while the worker was intoxicated or using illegal drugs
Injuries caused by intentional misconduct or fighting
Off-the-clock injuries (lunch breaks off premises, personal errands, etc.)
Injuries that happen outside the scope of work
Stress, unless work-related and medically proven
Normal sickness (like flu or cold)

Common Types of Workplace Injuries Covered

To make it practical, here are examples of actual claim scenarios:

✔️ Slip and falls

A worker slips on a wet floor and injures their back.

✔️ Repetitive motion injuries

Carpal tunnel, tendonitis, or strain from repetitive tasks.

✔️ Machinery or tool accidents

Cuts, fractures, or amputations.

✔️ Vehicle accidents

If the employee was driving for business purposes.

✔️ Exposure to harmful substances

Chemical inhalation, mold exposure, or toxic fumes.

✔️ Injuries during required travel

Delivery drivers, technicians, inspectors, consultants, etc.

How the Workers’ Compensation Claims Process Works

A simplified step-by-step process:

1. Injury Occurs

The employee gets hurt or sick while performing job duties.

2. Employee Reports the Injury

This should happen ASAP. Delays complicate claims.

3. Employer Files the Claim

The employer submits the report to their insurance carrier.

4. Medical Evaluation

The employee receives approved medical treatment.

5. Claim Investigation

The insurance company reviews the incident, medical reports, and statements.

6. Acceptance or Denial

Accepted: benefits begin
Denied: both parties can appeal

7. Wage Replacement Begins

If the employee can’t work, wage replacement starts after the state’s waiting period.

8. Return-to-Work Program

The employer may offer modified or light-duty assignments.

9. Case Closes

After recovery, permanent benefits may be awarded if needed.

How Much Does Workers’ Compensation Cost?

Workers’ comp pricing varies—it’s not a flat rate. The cost is calculated by:

1. Your Industry (Class Codes)

High-risk industries pay more:

Roofing
Construction
Manufacturing

Low-risk industries pay much less:

Office work
Consulting
Retail

2. Your Payroll

Premiums are calculated per $100 of payroll.

More payroll means a higher premium.

3. Claims History (Experience Mod)

A clean history lowers costs. A history of injuries raises them.

4. Number of Employees

More employees = more exposure = higher premium.

5. Location

State regulations and medical costs impact pricing.

What Is a Workers’ Compensation Ghost Policy?

A ghost worker's compensation policy is a special, low-cost workers’ comp policy designed for:

One-person businesses
Sole proprietors
Independent contractors
Small businesses with zero employees

What the ghost policy includes:

It satisfies general contractors who require proof of coverage
It shows your business has active workers’ comp

What it does not include:

It does not cover you
It does not cover hired workers
It does not provide benefits

If you add employees at any point, you must convert it to a full policy.

Common Mistakes Employers Make (and how to avoid them)

Here are the mistakes that cause the most headaches:

1. Misclassifying Employees as Contractors

If the state finds that your “1099 contractor” is legally an employee, you may face huge penalties.

2. Letting the Policy Lapse

A single missed payment can cause:

Instant cancellation
Legal penalties
Loss of coverage
Higher premiums when reinstated

3. Underreporting Payroll

This triggers audits—and expensive corrections.

4. Ignoring Safety Policies

Insurance companies reward safe workplaces.

5. Not Reporting Injuries Quickly

Fast reporting simplifies the claims process and lowers disputes.

Workers’ Compensation and Remote Employees

Yes—remote workers can still file workers’ comp claims.

Example: If someone injures their back while lifting company equipment at home, the injury may be covered.

Your policy should clearly outline remote-work safety expectations.

Workers’ Compensation vs. General Liability Insurance

These two are often confused, so here’s the difference:

Workers’ Comp	General Liability
Covers injuries to employees	Covers injuries to customers/visitors
Required by law	Optional but recommended
Pays medical bills & lost wages	Pays third-party medical bills & legal costs
Protects the employer from employee lawsuits	Does not cover employees

You need both to be properly protected.

How to Reduce Workers’ Compensation Costs

You can lower your premiums by:

Implementing safety training
Using proper equipment
Conducting routine inspections
Offering return-to-work programs
Keeping an injury log
Hiring a knowledgeable insurance broker
Updating job descriptions accurately
Maintaining a clean claims history

Insurance companies love safe businesses—and reward them with lower costs.

Frequently Asked Questions (FAQ)

Do small businesses need workers’ comp?

Yes—if you have even one employee.

Are family members considered employees?

Often, yes. It depends on your state and structure.

Does workers’ comp cover injuries off the job?

No, injuries must be work-related.

Can an employee sue me if I have workers’ comp?

Generally, no—that’s the purpose of the system.

Does workers’ comp cover stress or mental health issues?

Only if directly tied to work and medically supported.

Do part-time workers need to be covered?

Yes—part-time, seasonal, and temporary employees are typically covered.

Are volunteers covered?

Sometimes—it depends on state rules.

Final Thoughts

Workers’ compensation isn’t just a legal requirement. It’s a promise — a commitment that if something goes wrong, your team is protected and your business stays stable.

It’s one of the smartest investments a business can make.

Need Workers’ Compensation Insurance? We Can Help.

Insure Connecticut LLC is an independent insurance broker that helps small businesses, contractors, and growing companies secure:

We shop multiple carriers to get you the best price and the right protection.

📞 Call: (860) 970-0977

📧 Email: info@insureinct.com