Workers' Comp Settlement: How It Works (2025)

What Is a Workers' Comp Settlement?

Every state has a workers’ compensation system. These systems serve several purposes. First, it’s only fair that your employer helps you after you suffer an injury while working for its benefit. This help comes in the form of workers’ comp payments, which cover medical care and part of your wages.

Second, your employer pays for the cost of a workers’ comp policy. In exchange, it becomes immune from personal injury lawsuits filed by employees for on-the-job accidents.

Finally, both you and your employer have an interest in getting you back to work after an injury or illness. Whether you were disabled by carpal tunnel syndrome or a concussion, everyone benefits when you get treatment and return to work.

But in some cases, employees cannot return to work or cannot return to the same level of performance. These situations can result in significant financial and legal obligations for a workers’ comp insurer. To resolve these liabilities, insurers will often offer a settlement.

Three situations permanently impair a worker’s abilities and can trigger a settlement offer.

Death

Fatal work injuries happen in certain industries more often than others. Loggers, construction workers, and commercial fishermen have the highest fatality rates. Transportation and construction, as large and hazardous industries, have the highest overall number of fatalities.

After an employee’s death, workers’ compensation pays death benefits to the employee’s surviving family members, often in a settlement.

Permanent Total Disability

A worker is totally disabled when they cannot maintain any gainful employment due to a physical or cognitive impairment. The employee not only can’t return to their previous job but is unable to do any work for which they could receive payment.

For example, someone who suffered a broken neck that caused quadriplegia has a permanent total disability that may result in a neck injury settlement. In cases involving spinal fusion surgery, workers’ comp settlements can vary significantly depending on the severity of the injury and the long-term impact on the worker’s life. The average settlement for such cases often reflects the high costs of treatment and ongoing care.

Permanent Partial Disability

A permanent partial disability happens when a worker suffers injuries that cannot heal but still leave them able to work. Most states require a doctor to determine that the worker’s injuries have reached maximum medical improvement, which means that they will not heal any further even with additional treatment or therapy.

For example, an employee who loses a hand has a permanent partial disability. A knee injury that permanently affects the worker’s ability to stand for long periods of time might also qualify as a partial disability. In these cases, the insurer might offer to settle the claim.

How Does a Workers’ Comp Settlement Work?

Most employees receive temporary wage replacement through workers’ compensation. However, employees who suffer permanent disability may be offered a settlement instead. While this might seem similar to a personal injury settlement, a workers’ compensation claim is not a lawsuit — it’s simply a request for insurance benefits.

When Will Workers' Comp Offer a Settlement?

Insurers will offer settlements when they face large or ongoing payments for death or permanent disability benefits.

While state laws vary, insurers usually pay death benefits in settlements. These benefits may include:

• The employee’s average weekly wage for a certain amount of time
• Funeral expenses
• Burial costs

If the employee required medical treatment before eventually succumbing to their work-related injuries, the insurer will also pay those medical bills.

Benefits for permanent total disability also include the worker’s average weekly wage up to a maximum amount set by each state’s workers’ comp laws. This maximum might be a dollar amount, such as $300,000, or a time limit, such as 85 weeks.

Permanent partial disability benefits are based on the worker’s disability rating. This rating depends on which body part has suffered the permanent injury. An amputated leg would result in a higher rating than an amputated toe, for example.

Workers who suffer two permanent injuries receive a rating that takes both into account. However, the combined rating is not simply calculated by adding the two ratings together. Instead, the insurer relies on a whole-body rating system that uses a complicated equation to calculate the total disability rating for multiple partial disabilities.

What Happens When a Workers’ Comp Claim Goes to Trial?

If an employer’s insurance is unwilling to pay a legitimate workers’ compensation claim or is offering to pay far less than it’s worth, an injured worker’s lawyer may file a lawsuit. At this point, the parties can agree on a settlement. If they don’t, the case goes to trial, and a judge or jury will decide whether the employee is entitled to a settlement.

How Are Workers’ Comp Settlements Calculated?

The workers’ comp settlement amount you receive will depend on the type of claim and the nature of the disability. Death settlements are usually larger than permanent disability settlements, and permanent total disability settlements are usually larger than permanent partial disability settlements.For example, the average payout for carpal tunnel cases is $34,987, though this can vary based on the severity of the condition and state laws.

Why does workers' comp want to settle? Wage replacement benefits are paid weekly. Many insurers prefer issuing a single workers' comp settlement check rather than continuing to pay the worker or their family every week.

Workers’ comp insurance companies are particularly motivated to settle workers’ comp claim payments in states without fixed end dates for benefits. An insurer might pay for decades if the state requires permanent disability payments to continue until the worker’s death.

Also, some insurers will suggest settling a workers' comp case to see if the worker will accept a lower lump sum instead of waiting for their weekly checks. Thus, an insurer might offer a $100,000 workers’ comp payout even though the worker might receive $150,000 in weekly payments over four years.

The worker benefits by having money to pay for home and vehicle modifications, caretakers, and living expenses. The insurer benefits by paying less than the amount legally required and taking the case off its books.

How Are Workers’ Comp Settlements Paid Out?

There are two main ways settlements can be paid out:

• Lump Sum: You receive all compensation at once.
• Structured Settlement: You receive multiple payments over time.

Each option has its own benefits and drawbacks. If you are awarded a settlement, your lawyer can help you decide which one is best.

State-Specific Rules on Workers’ Comp Settlements

Each state has its own laws regarding workers’ comp settlements. These are a few examples:

• Some states will not allow a workers’ comp settlement to impact medical benefits.
• Some states require the court to verify that a settlement doesn’t violate state law.
• Some states don't allow settlements to be offered at every stage of the claims process.

If you suffer a personal injury at work and think you may need to file a workers’ compensation claim, it’s wise to consult an attorney as soon as possible. A lawyer may be able to help you understand your state’s workers’ compensation laws and how they impact your case.

How to Get the Best Workers’ Comp Settlement

Many injured workers end up making costly mistakes during the workers’ compensation process. The best way to increase your chances of success is by working with an experienced workers’ compensation lawyer.

Are you wondering, “Who can take my workers' comp settlement?” The answer is an experienced attorney. An attorney who’s knowledgeable in workers’ comp cases can help you understand the tax implications of your settlement and whether some of the money will be taken to fulfill other obligations.

Learn More About a Workers’ Compensation Injury Settlement From ConsumerShield

Workers’ comp insurers offer settlements to resolve cases. They do not necessarily do it to benefit injured workers. ConsumerShield can help you find the right lawyer, who will not encourage you to take the first offer and will recommend pushing back and negotiating for a more beneficial settlement. Contact us for a free case evaluation.