How to Settle With a Workers Comp Plan

If you're injured on the job, workers' compensation insurance should cover medical bills and disability payments if you're permanently or temporarily unable to work. The insurance carrier may continue these benefits as long as state law requires, or it can offer a lump-sum payment to settle the case. If you are the injured worker in your small company, you must take into account the nature of the injury -- and some other important factors -- before deciding on a settlement.

Settlement Benefits

A work comp settlement is always optional on the part of the insurance company as well as the injured worker. The settlement may include a wide variety of benefits, including future permanent or temporary, total or partial disability benefits as well as medical expenses, physical therapy, prescriptions, and vocational rehabilitation. To reach a fair settlement, you must calculate what all potential future benefits would be worth at the present time. This "present-value" discount is a percentage figure that attorneys and insurance companies agree to apply to any and all future payments. Many states set or restrict the present-value discount. Minnesota, for example, allows a maximum discount of 5 percent.

Settlement or Hearing?

If you are unable to agree on a lump-sum settlement, the insurance company may agree to a hearing. This is a conference before a state workers' compensation judge or mediator, in which both sides hammer out the terms of a settlement. Of course, a hearing carries risk -- if you're bound to the settlement the court comes up with, you may get less than you believe you're owed. If you're not bound to the hearing decision, and still can't reach an agreement on settlement, you may continue to receive benefits when they are due. Most states limit the period of time in which you can receive indemnity benefits, and some work comp policies also cap the medical and other expenses.

Keeping Medicals Open

Keep in mind that a work comp settlement may terminate all medical benefits in exchange for the lump-sum payment. If your medical condition is serious and you're uncertain of the cost of future treatment, this is a dangerous feature. You may have the option to "keep medicals open" by the settlement terms, which allows you to claim these expenses (surgery, prescriptions, office visits, etc.) as they come up. The settlement will be worth less, but you're covered in the case of unforeseen expenses. In addition, any fair settlement must include payment for medical treatment related to your work injury, but which was denied or never paid out by the carrier.

Disability Ratings and Payment Terms

The value of your disability benefits depends largely on your disability rating. This is a percentage figure assigned by a doctor to the reduction in your work ability. In California, for example, this disability rating sets the period of time in which you may receive payments. A 40 percent permanent, partial rating, for example, translates into 201 weeks of benefits at $230 per week, as of publication. That means the rating is worth a total of $46,230. This figure is crucial in determining the value of a settlement. In addition, some states restrict the terms of work comp settlements. You may need to accept a stream of regular payments, for example, in a state where the law does not allow a lump-sum settlement.