Workers compensation insurance, commonly known as workers comp insurance or work cover, is designed to protect workers financially in the event they’re injured or fall ill as a direct result of their work. It’s mandatory for all businesses that employ people to have an active workers compensation policy, meaning you don’t need to take it out as an individual.
146,700 serious workers compensation claims across 2023 and 2024 resulted in at least one week’s worth of work being lost, according to Safe Work Australia. So, whether you’re running a small business with your own workforce or are an employee, though, knowing what you can be covered for in the event of an accident is crucial.
What does workers compensation insurance cover?
Workers compensation insurance can cover the following injuries and illnesses:
- Physical injuries (such as cuts and broken bones)
- Mental injuries (such as anxiety and depression)
- Diseases (such as Q-fever and melanoma)
The incidents leading to your injury that are covered can differ between states and territories. The table below shows the main events you can and can’t claim for where you’re working:
| ACT | NSW | NT | QLD | SA | TAS | VIC | WA | |
|---|---|---|---|---|---|---|---|---|
| Illness/injury caused at work | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
| Illness/injury outside work (work being a major factor) | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
| Aggravation of a previous/underlying injury while at work | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
| Work-related travel | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
| On-site breaks | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ | ✓ |
| Off-site breaks | ✓ | ✓ | ✓ | ✓ | ✗ | ✗ | ✓ | ✓ |
| Journeys to or from work | ✓ | ✗ | ✗ | ✓ | ✓ | ✗ | ✗ | ✗ |
| Correct as of February 2026. Conditions, limitations and exceptions apply to each area of coverage. All claims are subject to assessment from the relevant insurer or workers compensation insurance regulator. | ||||||||
In terms of the benefits you can receive as part of your claim, these will also depend on what part of the country you’re working in and the nature of the work-related incident. However, the most common types of benefits for work-related claims are:
- Weekly payments (to replace wages)
- Cover for treatment and rehabilitation expenses
- Lump sum payment (such as for permanent impairment)
- Death benefits (paid to beneficiaries or dependants of the deceased)
Example: receiving work cover for a physical injury
Ben is a construction worker who builds houses. On his latest jobsite, he suffers a freak injury when a brick that isn’t properly secured falls and badly breaks his foot. He seeks medical attention and is told that he can’t work for eight weeks. He makes a workers compensation claim and is paid as normal while he recovers, as well as having all his medical and rehab costs reimbursed.
Is workers compensation insurance the same as public liability cover?
No, public liability insurance is a different type of cover that protects businesses against claims of injury or illness to a third party or damage to their property while on your premises. In the context of businesses, this refers to customers, other industry professionals or passersby.
For example, if a senior customer slipped over on a water spill in a restaurant and broke their hip, a public liability insurance policy would cover the cost of the customer’s medical bills and any other damages owed to them.
It’s important to note that this type of insurance doesn’t cover injury to employees or damage to their property, which is what sets it apart from workers compensation insurance. It also isn’t mandatory for all businesses, though it may be in certain cases (such as for electricians and plumbers).
How much does workers compensation insurance cost?
The table below shows what the average workers compensation premium is in each state and territory, which is calculated as a percentage of your business’ remuneration costs:
Because workers compensation is purchased via a government scheme, you can't bundle it with other business insurance products for a discount.
The NSW Government has increased the average rate by 8% each year from 2023-24 to 2025-26, but doesn’t state the average. The same is true in the Top End, as the average rate isn’t disclosed by NT WorkSafe.
However, these figures are only averages. In reality, not only are different businesses going to end up paying different sums for their workers compensation based on their size and salary bill, but also their industry. For example, in the ACT in 2025-26, here are some of the suggested premium rates for different lines of work:
- Bricklaying services: 12.19% of wages
- Roofing services: 11.97%
- Taxi and other road transport: 8.37%
- House construction: 5.31%
- Plumbing services: 4.62%
- Supermarket and grocery stores: 4.27%
- Electrical services: 3.23%
- Cafes and restaurants: 2.50%
- Legal services: 0.74%
- Accounting services: 0.29%
As you can see, there are substantial differences between different industries, largely based on the physical risks posed to employees.
Example: working out the cost of workers compensation insurance
Diane runs a retail business in Perth which employs six workers on a part-time basis. They each work three days per week and are paid $30 per hour, meaning her total annual payroll bill is $196,560.
Her workers compensation insurance policy charges her a premium in line with the average for her industry, which is 1.68% for retail trade in 2025-26. All up, that means she’ll pay $3,302 per year in workers compensation premiums.
Why compare business insurance policies through Savvy?
Can my business be sued after a workers compensation claim?
Yes, it’s possible to be sued in certain circumstances by a current or former employee who suffered injury or illness as a result of their work for your business. If an employee has suffered a permanent impairment and believes that you were negligent in your operations, they can make a common law claim.
The threshold for successful common law claims made in court can vary depending on where you are in Australia, but usually requires an employee to prove that you were negligent and that this negligence resulted in a whole person impairment (WPI) of at least 15%. Although this is a more complex (and potentially costly) venture for employees, a successful claim may open the door for improved benefits.
Importantly, most workers compensation insurance policies will offer cover to businesses that are subject to a common law claim, though this will ultimately depend on your insurer and where you’re operating.
Does workers compensation insurance cover sole traders or contractors?
In most cases, workers compensation insurance doesn’t cover sole traders or contractors. For contractors, you’ll need to be what’s called a deemed worker to be covered for work-related incidents. The definition of a deemed worker is different in each state and territory but, according to Monaco Compensation Lawyers, some of the points you’ll need to tick off include:
- You’re doing most of your work for a single company on an ongoing basis
- Your employer provides any tools and materials involved in your work
- You’re paid a regular wage, rather than invoicing for your work
- Your employer exercises greater control over how and when you work
Sole traders, on the other hand, aren’t as likely to be covered for workers compensation as a deemed worker. That’s because they’re employing themselves and no one else. It may be worth looking into an alternative in this situation if you don’t qualify, such as income protection insurance, but it’s always worth speaking to the business you’re working with if you aren’t sure.
