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Definition of Workers Compensation Insurance

Workers' compensation insurance is what provides workers' compensation coverage to employees of an employer. Workers' compensation is a type of no-fault, business insurance that employers, with few exceptions, in every state except Texas are required by law to have. Workers' compensation insurance refers to who is providing that insurance coverage to an employer.

In most states, employers have three choices when it comes to workers' compensation insurance. An employer can choose to be self-insured. In some states, an employer can become a member of a self insured group of employers. However, in order to be self-insured, an employer has to meet some strict requirements and qualifications. An employer may choose to purchase workers' compensation insurance from a private insurance company, or an employer may be covered by an insurance program that is run by the state. In a small number of states, employers are not permitted to be self-insured. Ohio, Washington, Wyoming and North Dakota are what are known as monopolistic states. In these states, workers' compensation insurance is provided exclusively by the state's Designated Workers' Compensation program. Some of these states permit limited self-insurance. However, the qualifications are so restrictive that only a few large, extremely well funded employers are able to qualify for self-insurance.

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