A contractor's employee is injured on a Tennessee job site and files a workers' compensation claim for $25,000. The contractor's policy has a $1,000 deductible. How much will the insurance company pay?
Correct Answer
B) $25,000
Workers' compensation benefits are paid in full by the insurance company; deductibles apply to the employer's reimbursement to the insurer, not to injured worker benefits.
Why This Is the Correct Answer
Workers' compensation benefits are paid in full to the injured employee by the insurance company. The $1,000 deductible is a reimbursement obligation between the contractor (employer) and the insurer — it does not reduce the benefits the injured worker receives. The insurer pays the full $25,000 claim, then bills the contractor for the $1,000 deductible.
Why the Other Options Are Wrong
Option A: $23,000
$23,000 incorrectly subtracts $2,000 from the claim, which does not correspond to any standard deductible calculation in this scenario. This answer reflects a mathematical error or confusion with a different deductible amount.
Option C: $24,000
$24,000 subtracts the $1,000 deductible from the $25,000 claim, which would be correct if the deductible reduced the worker's benefit — but it does not. The deductible is an employer-insurer reimbursement mechanism, invisible to the injured worker.
Option D: $26,000
$26,000 exceeds the claim amount with no logical basis. Insurance companies do not pay more than the actual claim amount.
Memory Technique
Imagine the insurer as a relay runner who passes the full baton ($25,000) to the injured worker first, then turns around and asks the employer to hand back a small piece ($1,000). The worker always gets the full baton.
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