What is workers compensation insurance and what does it cover?

Workers compensation is a system of no-fault insurance for workplace injuries and occupational illnesses. Coverage includes: medical expenses for the work-related injury/illness; temporary disability benefits (partial wage replacement during recovery); permanent disability benefits (compensation for lasting impairment); rehabilitation costs; and death benefits to survivors. The trade-off (sometimes called the 'workers comp bargain') is that the employee receives benefits without proving employer negligence, but gives up the right to sue the employer in tort. Coverage is required in nearly every state (Texas alone allows opt-out, with significant employer liability if they do). State laws govern eligibility, benefit amounts, and procedures. Employers pay all premiums; employees do not contribute. Premiums are based on payroll, classification of work (more dangerous occupations cost more), and the employer's experience modification (claim history affects rates).