What is Workers' compensation?

Workers' compensation insurance pays medical costs and lost wages when an employee is hurt or becomes ill on the job, in exchange for the employee generally giving up the right to sue. It is mandatory for employers in nearly every state, and a few states (including North Dakota and Wyoming) require coverage through a state-run monopoly fund rather than private carriers.

Premiums are quoted as a dollar rate per $100 of payroll and vary sharply by job classification: a desk role might cost well under $1 per $100, while construction or manufacturing can run several dollars. It is part of the fully-loaded cost of a W-2 employee but does not apply to a genuine 1099 contractor.