State compensation insurance fund

A state-run program offering workers’ compensation insurance.


What is a state compensation insurance fund?

A state compensation insurance fund is a state-run organization that offers workers’ compensation insurance to businesses. It covers employees who suffer injuries or illnesses related to their work.

Depending on the state, you’ll find a fully state-owned fund, private insurers, or a mix of both providing this essential coverage.

This fund is an option for businesses that can’t secure workers’ compensation insurance through private insurers.

Who uses state compensation insurance funds?

As a business owner, you might opt for State Compensation Insurance Funds for your workers’ compensation insurance needs. If your business is in Ohio, North Dakota, Washington or Wyoming, these state-run funds are your only option. In these monopolistic states, workers’ compensation insurance does not include employer’s liability insurance.

For other states, you can choose between state funds and private insurers. If you’re having difficulty securing coverage through traditional insurance channels, these state funds could be your preferred choice. To be eligible for state funds, your business must meet certain criteria:

  • Location. Your business must be located in a state that mandates using the state fund.
  • Insurance status. You may be eligible for state funds if an insurance company has declined your business.
  • Business type. The eligibility of different types of businesses can vary by state.
  • Business size. The size of your business — often determined by the number of employees — can affect eligibility and varies by state.

State compensation insurance fund vs. traditional insurance providers

State compensation insurance plans focus on workman’s compensation issues. In contrast, traditional insurance providers offer a wider selection of products with broader protection for property, goods, injuries and more.

While the state compensation insurance fund focuses on workers’ compensation insurance, traditional insurance providers offer a wider range of products.

They may also provide workers’ compensation insurance, but their offerings extend to other areas such as property insurance, general liability, professional liability, personal and commercial auto, health insurance, life insurance and more.

What types of workers’ compensation coverage are typically offered by state compensation insurance funds?

Each state has its own laws and regulations governing workers’ compensation, and the coverage provided may fluctuate. These are some common types of workers’ compensation coverage:

  • Medical benefits. Covers necessary medical expenses related to a work-related injury or illness, including treatment, hospitalization and medication.
  • Disability benefits. Compensates for lost wages due to a work-related injury or illness, whether it’s temporary or permanent disability.
  • Death benefits. Provides financial support for funeral expenses and ongoing assistance to the dependents of a worker who dies due to a work-related injury or illness.
  • Vocational rehabilitation. Helps injured workers who can’t return to their previous jobs by providing services to acquire new skills or find alternative employment.
  • Legal representation. Offers legal assistance to injured workers in disputes or challenges related to their workers’ compensation claims.

Pros and cons of state compensation insurance

  • Lower rates
  • Accessible for all businesses
  • Government-backed stability
  • High approval rates
  • Public service focus
  • Limited choice
  • Bureaucratic processes
  • No customization
  • Standardized plans
  • Uneven coverage

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