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Workers' Compensation Settlements | Workers' Comp 101

Dealing with a workers’ compensation settlement? Here’s the scoop on what they are and how they work.
Workers' Compensation Settlements | Workers' Comp 101

Understanding workers’ compensation settlements

What is a workers’ compensation settlement?

A workers’ compensation settlement is an alternative to a workers’ compensation offer.

If one of your team members is injured at work, you’ll want to be sure you have a workers’ compensation policy in place so that the employee gets the help they need and your company isn’t put at significant financial risk.

When an employee sustains a compensable work-related injury, the employee has a right to file a claim for workers’ compensation benefits, which can include payment for medical bills, lost wages, and vocational rehabilitation.

After the injured employee has filed a workers’ compensation claim, and the employer’s insurance company has processed the claim and made an offer, the employee has a few options.

Depending on the state workers’ compensation laws, the employee can:

  • Accept the workers’ compensation offer
  • Dispute the offer with the state workers’ compensation board
  • Negotiate a lump-sum payout or larger structured settlement

How do workers’ compensation settlements work?

If an employee decides to pursue a settlement, they will usually hire a lawyer to negotiate with the insurer on their behalf. In most states, once the employee, lawyer, and insurer agree on the terms of the settlement, they must submit the proposal to the workers’ compensation board for approval.

Whether a workers’ compensation settlement is in the form of a lump-sum payout or structured payments, the settlement typically closes out the claim and releases the employer from further responsibility for compensation.

What else should employers know about workers’ compensation?

To learn more about workers’ compensation insurance, check out our resources on how workers’ comp benefits employers, how workers’ compensation claims affect employers and how to protect your business from workers’ compensation fraud.

Thanks for reading! Please note that this content is intended for educational purposes only. As laws change regularly, you should refer to your state legislation and/or an advisor for specific legal counsel. If you’re a small business owner, learn more about workers’ compensation insurance or check your current rate in 3 minutes.