A financial settlement when a worker is injured on the job is not always necessary. An employer's worker's compensation insurance typically pays for the majority of an injured worker's medical costs and provides other benefits like wage replacement. A financial settlement may be necessary in the event a worker is permanently injured as the result of a workplace accident or acquired illness.
When you are injured on the job and unable to immediately return to work, worker's compensation insurance usually pays a portion of your lost wages so you can keep paying the bills while you're recovering. As of January 2011, the replacement rate for lost wages in most states is about 66 percent of your monthly income prior to your injury. The amount of time worker's compensation will replace lost wages also varies by state, so it's important to check with your state's worker's compensation insurance department to determine how long you can receive benefits.
Payment for Medical Bills
Worker's compensation insurance also pays for your medical bills associated with your on-the-job injury. Worker's compensation insurance in some states pays for 100 percent of medical costs associated with the accident, including any rehabilitative needs you may have as part of your recovery. Some states pay medical costs up to a predetermined amount. The worker retains the right to see the doctor of his choice, though the employer may choose which physician the employee sees when he is first injured while on the job.
In the event of an injury settlement, there are two types of injury settlements you may reach with your employer: a stipulated finding and award settlement and a compromise and release settlement. The first settlement type is an agreement between you and your employer where you are paid based on your percentage of disability and your need for medical care over time. A stipulated finding and award pays you a periodic benefit for an agreed-upon period of time. A compromise and release settlement is a lump-sum payment from your employer. If you agree to a compromise and release settlement your worker's compensation claim is effectively closed and you are no longer entitled to paid medical care.
Permanently Disabled Workers
A settlement is usually sought when a worker's injuries render him permanently unable to return to work. This allows an employer to find some relief from the long-term payments associated with medical care and allows the injured employee to receive compensation. A permanently injured worker may also be eligible for Social Security Disability Insurance benefits, which normally kick in after any worker's compensation wage replacement has run out. Social Security Disability benefits may continue for the life of the injured worker.