Workers’ Comp Insurance Glossary: Terms Every Small Business Owner Should Know
Workers’ comp comes with its own vocabulary, and a lot of it shows up in your policy documents, your renewal paperwork, or a conversation with your agent without much explanation. This glossary collects the terms you’re most likely to run into as a small business owner, in plain English, with links to a full guide wherever we’ve covered a topic in more depth elsewhere on the site.
How to use this page: entries are alphabetical. If a term has its own dedicated guide, the definition links out to it — use this page as a quick lookup, and the linked guide when you need the full explanation.
A
Additional Insured — A person or business (often a client or general contractor) added to your policy so they’re also protected under certain circumstances arising from your work. More common on general liability policies than on workers’ comp itself.
Assigned Risk Plan (Residual Market) — A coverage option of last resort for businesses that can’t find a private insurer willing to write their policy voluntarily, usually because of a high-risk industry or a poor claims history. Assigned risk coverage is typically more expensive than the voluntary market and comes with less flexibility, but it exists specifically so that no legally-required-to-carry-coverage business is left completely unable to get insured.
Audit (Premium Audit) — A review, usually conducted annually after your policy period ends, comparing your estimated payroll (used to set your premium at the start of the policy) against your actual payroll and class code usage. Audits can result in either a refund or an additional bill, depending on the difference. See workers’ comp insurance audits: what to expect.
Average Weekly Wage (AWW) — The figure used to calculate an injured employee’s wage-replacement benefits, typically based on their earnings over a period before the injury (commonly the prior 52 weeks, though this varies by state).
C
Certificate of Insurance (COI) — A document issued by your insurer that proves you carry active coverage, often requested by clients, landlords, or general contractors before they’ll sign a contract with you. See certificate of insurance for workers’ comp: what contractors need to know.
Class Code — A code assigned to a group of your employees based on the type of work they do, used to determine the base rate applied to their payroll. See how workers’ comp premiums are calculated (class codes explained).
Coming and Going Rule — The general principle that injuries occurring during an employee’s normal commute to and from work are not covered by workers’ comp, with several common exceptions (company vehicles, travel between job sites, work errands).
E
Employer’s Liability Insurance — Coverage (usually bundled with a standard workers’ comp policy, but notably absent from monopolistic state fund policies) that protects an employer against certain lawsuits related to a workplace injury that fall outside the standard workers’ comp claims process — for example, a claim brought by an injured employee’s family member. See monopolistic states vs. private workers’ comp insurance.
Exclusive Remedy — The legal principle that, in exchange for guaranteed no-fault workers’ comp benefits, an injured employee generally gives up the right to separately sue their employer over the same injury. See what is workers’ comp insurance and how does it work.
Expected Losses — The statistically predicted claims cost for a business of a given size, industry, and location, used as the baseline for calculating an Experience Modification Rate.
Experience Modification Rate (EMR / «Mod») — A factor, centered around 1.0, that adjusts your premium up or down based on how your company’s actual claims history compares to the expected baseline for similar businesses. See what is an experience modification rate and why it matters.
Extraterritorial Coverage — A policy provision that extends your workers’ comp coverage to claims that arise when an employee is temporarily working in a different state than the one your policy was written in. Rules and limits on this vary significantly by state — don’t assume it applies automatically for extended out-of-state work.
I
Independent Medical Examination (IME) — An evaluation by a doctor selected by the insurer (rather than the employee’s treating physician) to give a second opinion on the extent of an injury, appropriate treatment, or readiness to return to work. IMEs are often used when a claim is disputed or when ongoing treatment is being reviewed.
L
Light Duty / Modified Duty — Temporary, adjusted work assignments offered to an injured employee who can’t perform their full normal job duties yet but can safely perform some tasks. Well-run light duty programs are one of the more effective ways employers reduce both claim duration and cost, which benefits the Experience Modification Rate over time.
Loss Run — A report from your insurer listing your company’s claims history over a period of time, including claim status and amounts paid or reserved. Useful to review when shopping for new coverage or checking your EMR calculation.
M
Manual Premium — The base premium calculated by applying your class code’s rate to your payroll, before applying your Experience Modification Rate or other adjustments. See how workers’ comp premiums are calculated.
Maximum Medical Improvement (MMI) — The point at which a treating physician determines an injured employee’s condition has stabilized and further medical treatment isn’t expected to produce significant improvement. Often a turning point in a claim — for shifting from temporary to permanent disability classification, for example.
Monopolistic State — One of four states (North Dakota, Ohio, Washington, Wyoming) where workers’ comp coverage must be purchased through a state-run fund rather than a private insurer. See monopolistic states vs. private workers’ comp insurance.
N
NCCI (National Council on Compensation Insurance) — The organization that develops standardized class codes and advisory rating information used by most (though not all) states’ private workers’ comp insurance markets.
No-Fault — The principle that workers’ comp benefits are available to an injured employee regardless of who was at fault for the injury (with narrow exceptions like intoxication or intentional self-harm).
Non-Subscriber — A term specific to Texas, referring to an employer who has opted out of the state’s workers’ comp system entirely — a choice available in Texas but not in most other states. See does Texas really not require workers’ comp insurance.
P
Pay-As-You-Go — A premium payment structure where workers’ comp premiums are calculated and paid based on actual payroll each pay period, rather than as a large upfront estimated payment trued up at audit. See pay-as-you-go workers’ comp insurance: is it worth it.
Permanent Partial Disability (PPD) — A category of wage-replacement benefit for an employee with a lasting impairment who can still work in some capacity.
Permanent Total Disability (PTD) — A category of wage-replacement benefit for an employee not expected to return to any gainful work because of the severity of their injury.
R
Rating Bureau — The organization responsible for developing class codes and rates in a given state — either NCCI or one of several state-specific independent bureaus (for example, WCIRB in California or PCRB in Pennsylvania).
S
Schedule Rating — A credit or debit applied to a policy based on a more subjective assessment of a business’s specific safety practices and workplace conditions, separate from the Experience Modification Rate.
Second Injury Fund — A state-administered fund, existing in some states, designed to encourage employers to hire workers with pre-existing disabilities by covering part of the cost if a new workplace injury combines with that pre-existing condition to cause a more severe overall disability. See second injury fund and workers’ comp.
Self-Insurance — An arrangement where an employer pays claims directly rather than through an insurance company, typically requiring state approval and significant financial qualifications. See self-insured workers’ compensation: is it right for your business.
Split Point — The dollar threshold used in the Experience Modification Rate calculation that divides each claim into a «primary» portion (counted in full) and an «excess» portion (counted at a reduced value), which dampens the impact of very large individual claims. See what is an experience modification rate.
Standard Premium — The manual premium after applying the Experience Modification Rate, before any additional schedule credits, discounts, or expense constants are applied.
Statute of Limitations — The legal deadline for filing a workers’ comp claim after an injury occurs, which varies by state. Missing it can jeopardize an otherwise valid claim.
Stop Gap Coverage — Supplemental coverage, typically added to a general liability policy, that fills the employer’s liability coverage gap left open by monopolistic state fund workers’ comp policies. See monopolistic states vs. private workers’ comp insurance.
Subrogation — The right of an insurer, after paying a workers’ comp claim, to pursue reimbursement from a third party who was actually responsible for the injury (for example, a defective equipment manufacturer). Some construction contracts require a «waiver of subrogation,» where the insurer gives up this right in advance as a condition of the contract.
T
Temporary Partial Disability (TPD) — A category of wage-replacement benefit for an employee who can work in a limited capacity (such as reduced hours or light duty) but earns less than before the injury.
Temporary Total Disability (TTD) — A category of wage-replacement benefit for an employee who cannot work at all for a period of time but is expected to eventually recover.
Third-Party Administrator (TPA) — A company hired (often by a self-insured employer, or sometimes by an insurer) to handle claims administration on behalf of the party bearing the financial risk.
V
Vocational Rehabilitation — Retraining or job placement assistance provided to an injured employee who can’t return to their previous role because of a lasting impairment. See what does workers’ comp insurance cover.
W
Waiting Period — The number of days after an injury before wage-replacement benefits begin, common in most states (often three to seven days), sometimes paid retroactively if the disability extends beyond a certain length.
Waiver of Subrogation — A contract provision, common in construction, where an insurer agrees in advance not to pursue reimbursement from another party involved in a project, even if that party contributed to a covered loss. Often required by general contractors before allowing a subcontractor onto a job site.
Didn’t find a term you were looking for? The concepts above link out to full guides covering each topic in depth — start with what is workers’ compensation insurance and how does it work if you’re new to the topic entirely.
This glossary is for general informational purposes only and does not constitute legal, insurance, or financial advice. Terminology and rules can vary by state. Before making coverage decisions, consult a licensed insurance agent or attorney.