Workers' compensation insurance is a financial tool that employers use to avoid having to pay for job-related injuries sustained by their employees. Laws on workers' compensation vary by state; however, any employer that employs three or more people typically must either purchase a workers' compensation policy or file a self-insured workers' compensation plan with the state insurance department. The length of time that you can draw workers' compensation benefits depends on the severity and duration of your injuries.
No predetermined time limit exists on workers' compensation benefits if you sustain a permanent total disability -- that is, if you are unable to perform any sort of work to which you are suited because of occupational injuries. This means that you may be able to draw workers' compensation for the rest of your life. The definition of total permanent disability varies from state to state, but typically includes the loss of two limbs or both eyes, or a six-month absence from work if a physician believes there is no possibility you could return to the workforce in the future.
Lump Sum Benefit
If you sustain injuries that qualify as a total permanent disability in your state, your employer's workers' compensation insurance provider or self-insurance administrator may pursue settlement through a lump sump payment. This helps the company avoid having to continue paying benefits for the rest of your life. If you accept a lump sum settlement, you will no longer be able to draw additional workers' compensation benefits.
If you make a full recovery from your injuries, as determined by a physician, your company's workers' compensation insurer or administrator may suspend or terminate your benefits. Your benefits may also typically be suspended or terminated if you return to work in any position that pays the same or more than the amount you earned before your injuries.
After receiving full worker's compensation benefits after a period of time, usually about two years, you may undergo an impairment rating evaluation to determine your ability to return to work. An impairment rating of less than 50 percent places you in a partial disability status, which typically carries a time limit for benefits. In Pennsylvania, for example, partial disability benefits are limited to 500 weeks.
The workers' compensation insurer or administrator may also use a Labor Market Survey to determine your earning capacity, and may refer you to employers for positions suitable to your disability. If you do not pursue these referrals, the insurer or administrator may place you in a partial disability status, limiting the time frame during which you can draw benefits.
- Workers Compensation Settlements: Permanent Total Disability
- Duncan Law, PLLC; Do All Employers Need to Provide Workers' Compensation Insurance?; October 2010
- "Understanding Workers' Compensation Insurance"; Sandy D. Moore; 2008