For the Property & Casualty exam, workers' compensation is tested both as a policy product and as a state-mandated system. Michigan runs its program under the Workers' Disability Compensation Act, requires most employers to carry coverage, and uses a competitive insurance market rather than a monopoly state fund. This guide reviews how the workers' comp policy is built and rated, then anchors everything in Michigan's specific rules and the agency that administers claims.

The workers' compensation policy (national structure)

The standard workers' comp policy has two main coverage parts:

• Part One – Workers' Compensation. The insurer pays all benefits the state's comp law requires—medical, disability income, and death benefits. There is no dollar limit because benefits are fixed by statute.
• Part Two – Employers Liability. Covers the employer for work-related injury suits that fall outside the comp statute (such as certain third-party-over actions). This part does carry dollar limits.

Other elements include Part Three – Other States Insurance (extends coverage to operations in listed states) and the information page, which lists states, class codes, and estimated payrolls used to price the policy.

Rating and premium are driven by:

• Classification codes matched to the type of work.
• Payroll (per $100) as the exposure base.
• The experience modification factor (mod), which raises or lowers premium based on the employer's loss history.
• A premium audit at the end of the term to reconcile estimated payroll with actual.

A competitive market in Michigan

Michigan does not operate a monopoly state fund. Coverage is sold in a competitive market by private licensed insurers, and employers also have alternatives:

• Buy a policy from a private licensed carrier.
• Self-insure with state approval (individually or through an approved group pool).
• Obtain coverage through the assigned-risk/residual market when standard insurers decline the risk.

This "competitive market" point is a common state-specific exam item—contrast it with states that run a single state fund.

Mandatory coverage and the administering agency

Coverage is mandatory for nearly all employers with employees, subject to thresholds for very small or limited operations. Claims and disputes are administered by the Workers' Disability Compensation Agency (within the state's labor department), where disputes proceed before magistrates and may be reviewed by the appellate commission.

An employer that illegally goes uninsured loses the exclusive-remedy protection, can be sued directly, and faces penalties and personal liability. Workers' comp is otherwise the injured worker's exclusive remedy against the employer.

Benefit types Michigan pays (conceptually)

Part One of the policy funds the statutory benefits. Conceptually they fall into familiar categories:

• Medical — reasonable and necessary treatment, generally with no deductible; the employer/insurer may direct initial care for a limited period before the worker chooses a provider.
• Wage-loss (disability) — a percentage of the worker's average weekly wage (AWW), commonly cited as about 80% of after-tax (spendable) wages, subject to a state maximum adjusted annually. Disability is classified as temporary/permanent and total/partial.
• Specific (scheduled) loss — set amounts for permanent loss or loss of use of listed body parts.
• Death benefits — wage-based payments to dependents plus a funeral/burial allowance.

Michigan's wage-loss formula keying off spendable (after-tax) wages is a distinctive detail compared with states that use a flat two-thirds-of-gross formula.

Who may be exempt

Most employees are covered, but Michigan recognizes limited exemptions, generally including:

• Sole proprietors and partners (owners, not employees—may elect coverage in).
• Certain corporate officers and LLC members who qualify to be excluded.
• Some small agricultural, domestic/household, and casual workers below statutory thresholds.
• Workers covered by federal programs—federal employees, railroad workers (FELA), and maritime/longshore workers.

Key Michigan numbers to memorize

Common exam traps

• Assuming Michigan has a monopoly state fund. It is a competitive market.
• Confusing Part One and Part Two. Part One pays statutory benefits with no limit; Part Two (employers liability) carries dollar limits.
• Using a flat two-thirds-of-gross wage formula. Michigan keys wage loss off spendable (after-tax) wages, commonly cited near 80%.
• Putting a deductible/waiting period on medical care. Medical is generally paid in full; any waiting period applies to wage-loss benefits, not treatment.
• Overstating exemptions. Owners may need to elect coverage, but employees—including most part-timers—are covered.
• Quoting a fixed maximum benefit. The state maximum is adjusted annually.

Quick recap

The workers' compensation policy pairs Part One (unlimited statutory benefits) with Part Two (employers liability, with limits), priced on payroll per $100, class code, and experience mod, and reconciled by premium audit. Michigan runs a competitive market—no monopoly state fund—so employers buy from private carriers, self-insure with approval, or use the residual market, and the Workers' Disability Compensation Agency administers claims before magistrates. Benefits include no-deductible medical, wage loss commonly cited near 80% of spendable wages capped at a yearly maximum, plus specific-loss and death benefits, all serving as the worker's exclusive remedy. Remember the two policy parts, the competitive market, and Michigan's spendable-wage benefit formula, and the workers' comp questions become reliable points.