What type of insurance covers medical expenses and lost wages for employees injured on the job?

Workers’ compensation insurance covers medical expenses and wage replacement for employees injured or made ill through their work. It is commonly shortened to workers’ comp.

The system is built around a trade-off often called the compensation bargain: an injured worker receives defined benefits without usually having to prove employer negligence, while the employer generally gains protection from ordinary personal-injury lawsuits. Benefits vary by jurisdiction, but may include medical treatment, temporary wage payments, permanent-impairment awards, rehabilitation, and benefits for dependents when a worker dies.

Workers’ compensation is not simply ordinary health insurance or private disability insurance. Health insurance generally covers medical care without requiring a workplace cause, while disability insurance focuses primarily on income loss. Workers’ compensation can combine both medical and wage-related benefits when the injury or illness is work-connected.

Modern systems developed from late-19th-century reforms. Germany enacted a landmark workers’ accident insurance law in 1884, and other countries followed with their own statutory schemes. In the United States, most rules are established by state law, so eligibility and benefit formulas differ.