Workers’ compensation is a program that allows you to collect payment for injuries you incur while at work. It is a no-fault system that provides you benefits without the need to go to court. In fact, the system prevents you from taking your employer to court for damages due to an injury, except in rare cases.

According to the Congressional Research Service, workers’ compensation is both a system and a type of insurance. The workers’ compensation system includes laws set by the state and the actual insurance policy that covers each employer. The federal government has limited regulations for workers’ compensation. It does not mandate that states have a system, nor does it set regulations for how states run their systems. There are some laws that imply the requirement for paying employees for injuries while on the job.

Payment of benefits

The state does not pay out benefits, but it does set the rules for coverage and which employers must carry the insurance. It also implements penalties for employers who do not carry the insurance. When you make a claim, though, it is the insurer with whom your employer has a policy that will pay out the money to you.

Obtaining insurance

Your employer must go through a private insurer to secure workers’ compensation insurance. A policy is similar to any other type of insurance. Your employer will pay a premium for coverage. You should note that your employer cannot pass the cost of this insurance on to you, so you should never have a workers’ compensation deduction from your pay.

Another option is that your employer can insure itself. If it has the funds, it can create its own reserve that it will use to pay injury claims. The state does have strict requirements for this and makes employers prove that they have reserve assets to cover their workers’ compensation fund.