Usually a workers comp policy has two parts: "Part One, Workers Compensation" and "Part Two, Employers' Liability."

Under "Part One", the insurer contracts to pay whatever the state-required amounts of compensation may be. Unlike other types of insurance, workers comp coverage has no ceiling or limit on the policy amount. The insurance company accepts a transfer of the employer's entire statutory obligation which is whatever the employer is legally obligated to pay as a result of the injury.

"Part Two" of the policy provides coverage for an employer who is sued by an employee for work-related bodily injury or illness that isn't subject to state statutory benefits. It has a monetary limit.

Employers' liability also insures an employer in some other situations. One is so-called third-party over suits, where an injured worker files suit against someone other than the employer (a third party) and that third party then seeks to hold the employer responsible. For example, an employee injured while working with a machine might file suit against the manufacturer of the machine. The manufacturer might then sue the employer claiming that the cause of the injury was modifications the employer made to the machine or improper use. Another situation where this liability coverage applies is when the spouse of an injured worker sues the employer for loss of consortium.