Workers’ compensation insurance provides medical and wage benefits to people who are injured or become ill at work. The coverage is mandated by each state and the wage and medical benefits vary by state. Workers’ compensation is considered a social insurance because it relies on a social contract between management and labor, wherein exchange for purchasing workers’ compensation insurance, business owners are protected from civil suits from their workers who become injured on the job. Workers’ compensation insurance is purchased by businesses, and is underwritten by insurance companies and, in some states, underwritten by publicly supported state funds.  Workers’ compensation provides medical expenses, lost wages, and rehabilitation costs to employees who are injured or become ill “in the course and scope” of their job. It also pays death benefits to families of employees who are killed on the job.

All states, with a small number of exceptions, require businesses with employees who are not owners, to purchased workers’ compensation coverage for those employees. Businesses that fail to provide workers’ compensation coverage can face severe and costly repercussions including payment of claims out of pocket, fines and possible imprisonment, as well as possibly losing the right to conduct business in the state.