Statutory Limits

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.