Statutory Limits
Also known as: Statutory Coverage, Part One Coverage, Coverage A
Statutory limits are insurance obligations set by law instead of by the policyholder's selection. The clearest example is Part One (Coverage A) of a workers compensation policy, which does not carry a chosen dollar limit at all; instead it promises to pay all benefits the applicable state statute requires—medical care, wage replacement, disability, and death benefits—regardless of total cost. Because the state legislature, not the insurer or the employer, defines what is owed to an injured worker, the coverage is described as "statutory" and is effectively unlimited within the terms of the law.
This matters to a small-business buyer because it separates the two very different halves of a workers comp policy. Part One is statutory and cannot be negotiated or reduced. Part Two, employers liability, is different: it covers lawsuits by employees or third parties that fall outside the no-fault comp system and does have selectable dollar limits, commonly written with standard amounts like $100,000/$500,000/$100,000 or increased to $1,000,000 to satisfy contracts and umbrella requirements. Buyers who assume their whole policy has a fixed limit sometimes underinsure Part Two, which is the layer an umbrella policy sits above.
The practical nuance is that statutory limits reflect the exclusive remedy bargain at the heart of workers compensation: employees give up the right to sue their employer for negligence in exchange for guaranteed, no-fault benefits, and in return the employer's Part One exposure is defined and paid entirely by the insurer per the statute. Benefits differ by state, so the same injury can generate different payouts across jurisdictions, and businesses operating in multiple states must list each on the policy so the correct statutory benefits apply. Because there is no cap, the true cost driver on Part One is the state law and the injury itself—not a limit the buyer selects.
Real-world scenario
Cedar Ridge Framing LLC, a rough-carpentry contractor in Georgia, carries a workers' compensation policy on an annual carpentry payroll of $1,850,000. The policy's Part One is written at statutory limits, meaning the insurer promises to pay whatever benefits Georgia's comp statute requires — there is no dollar cap. Cedar Ridge pays an annual premium of $96,200, driven mostly by the high-hazard framing rate, and carries a $0 deductible on the statutory portion because state law forbids shifting mandated benefits back onto the injured worker.
In March, a framer falls from a second-story wall plate and shatters his ankle. Because coverage is statutory, the insurer pays every benefit the law dictates: $420,000 in medical bills over two years of surgeries and rehab, temporary total disability at the 2026 Georgia maximum of $800 per week for 48 weeks ($38,400), and a permanent partial disability award of $62,000 based on the rated impairment. The claim's indemnity and medical together reach $520,400, and the file's employers liability section (limits of $100,000 / $500,000 / $100,000) stays untouched because the worker accepts benefits rather than suing.
The following year a different injury triggers a spouse's negligence suit seeking $900,000. That claim lands under Part Two, not the statutory Part One — the insurer funds $71,000 in defense costs and settles for $185,000, well inside the $500,000 aggregate. Cedar Ridge's loss history later pushes its experience modifier up, adding roughly $14,500 to the next renewal premium.
How it affects your premium
Because the statutory portion of a comp policy has no chosen limit, its cost is driven almost entirely by exposure and classification rather than by a limit selection. The main premium drivers are:
- Governing class code and rate: The NCCI class code assigned to the payroll sets the base rate — a roofing or framing code can cost 10-20x a clerical code for the same wages.
- Total and capped payroll: Premium is payroll times rate, and executive-officer wages are subject to payroll limitation minimums and maximums that adjust the exposure base.
- Experience modifier: A debit or credit experience modifier multiplies manual premium based on the employer's own loss history versus its peers.
- State benefit levels: States with richer statutory medical and wage-replacement schedules produce higher loss costs, so the same trade costs more in one state than another.
- Class-code split and audit: Records that cleanly separate higher- and lower-hazard duties can lower cost, verified at the year-end premium audit.
- Schedule and discount credits: Safety programs, return-to-work plans, and premium size can earn scheduled credits that reduce the final rate.
Common misconceptions
Myth: Statutory limits means my workers' comp policy has an unlimited payout for everything, including lawsuits.
Reality:
Statutory (unlimited) benefits apply only to Part One — the state-mandated medical and wage benefits. Lawsuits by an injured worker fall under Part Two employers liability, which carries specific dollar limits like $100,000/$500,000/$100,000.
Myth: Because comp is statutory, an injured employee can also sue my business for the same injury.
Reality:
In most states the exclusive remedy rule bars an employee from suing the employer for a covered injury — statutory benefits are the sole recovery, which is exactly why Part One has no dollar cap.
Myth: I can pick a lower statutory limit to save money, like I do with liability limits.
Reality:
There is nothing to select — the statutory limit is fixed by state law and cannot be reduced. You only choose limits on the employers liability (Part Two) side.
Frequently asked questions
What does "statutory limits" actually mean on my workers' comp policy?
It means Part One of the policy pays whatever benefits the state's workers' compensation statute requires — medical care and lost-wage benefits with no dollar ceiling — rather than a limit you choose.
Is there a deductible on statutory benefits?
Generally no. Mandated disability and wage benefits are paid in full to the worker, though some large employers negotiate a deductible where they reimburse the insurer behind the scenes.
How is the statutory Part One different from employers liability?
Part One pays state-mandated benefits with no limit; employers liability (Part Two) responds to lawsuits arising from workplace injuries and carries selected dollar limits such as $500,000 or $1,000,000.
Do statutory limits change if I hire workers in another state?
Yes — each state's statute sets its own benefit schedule, so the policy's Part 3A listed states control which statutory limits apply. Work in a monopolistic state must be covered through the state fund, not your private policy.
Are overseas or maritime employees covered under standard statutory limits?
Not automatically. Foreign travel needs foreign voluntary workers' comp, and maritime or dock work usually requires separate USL&H or Jones Act coverage endorsed onto the policy.
Sources cited
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