Understanding Your Workers’ Compensation Insurance Requirements
Workers’ compensation insurance is required for most businesses in nearly every state, but there are some exceptions. Are you unsure if your business fits the criteria for needing coverage? Keep reading to learn:
Who needs workers’ comp insurance?
Do you need workers’ comp insurance for one employee?
Do small businesses need workers’ comp insurance?
When is workers’ comp insurance required?
What happens if you don’t have workers’ comp insurance?
Who Needs Workers’ Compensation Insurance?
Most businesses with more than a few employees are required to purchase workers’ comp coverage, regardless of the state or states they work in, but there is no universal rule across the U.S. Each state has different workers’ compensation laws, so it’s important to understand your state laws or work with an insurance agent who does.
Depending on the state, these groups may be exempt from workers’ comp requirements:
Independent contractors
Sole proprietors
Corporate officers
Domestic workers
Agricultural laborers
Real estate agents
Employers with less than two, three, four, or five employees
Texas doesn’t require most private employers to carry workers’ comp insurance, but opting out of coverage exposes employers to injury lawsuits. South Dakota also does not have a law requiring coverage, but the state highly recommends it.
Do I Need Workers’ Comp Insurance for One Employee?
In most states, employers with one employee must buy coverage, but there are a few exceptions. These are the requirements for states that don’t mandate coverage for one employee:
Alabama: Five or more employees
Arkansas: Three or more employees
Florida: Four or more employees
Georgia: Three or more employees
Kansas: Coverage is required for any business with more than $20,000 of payroll, regardless of employee count
Michigan: Three or more employees (or less if one of your employees works 35 hours or more for more than 13 weeks)
Mississippi: Five or more employees
Missouri: Five or more employees
New Mexico: Three or more employees
North Carolina: Three or more employees
South Carolina: Four or more employees
South Dakota: Coverage is not required for any employer, but it’s highly recommended
Tennessee: Five or more employees
Texas: Coverage is optional for private employers
Virginia: Two or more employees
Wisconsin: Three or more employees
Companies in construction or other high-risk industries might be required to purchase coverage for one employee in some of the above states.
If you think you may be exempt from workers’ compensation coverage based on your type of business or the employees you hire, check with your insurance agent.
Does a Small Business Need Workers’ Comp Insurance?
Unless they meet the above exemption criteria, most small businesses need workers’ comp insurance. No matter your state’s rules, you should strongly consider purchasing coverage as a small business.
If you don’t have a workers’ comp policy, your employees can sue you for workplace injuries. Depending on their injury, you could end up paying hundreds of thousands of dollars out of pocket—which is enough to shut down most small businesses for good.
Workers’ comp isn’t the only essential coverage for small businesses. Learn more about your insurance options and requirements as a small business owner.
When Is Workers’ Comp Insurance Required?
In most cases, states require businesses to buy a policy as soon as they hire their first employee (or meet the state’s criteria). Failure to purchase a policy is a punishable offense. If you wait to buy a policy until several months—or years—after you meet your state’s coverage requirements, you could face penalties.
What Happens if I Don’t Have Workers’ Comp Insurance?
Each state has different penalties for uninsured employers. These can include:
Fines
Misdemeanor or felony charges
Prison time
Stop work orders
In addition to fines and penalties, business owners can face expensive lawsuits for work-related injuries.
Workers’ Comp Insurance Is Simple With Southpoint
Workers’ comp insurance might seem complicated, but it doesn’t have to be. With the right insurance agent on your side, you can easily fulfill your state’s coverage requirements.
Southpoint is an Illinois-based insurance agent, but our workers’ comp experts know the coverage requirements for states across the Midwest and beyond. We use our long-term relationships with insurance companies to shop for the best coverage in your state, and our team is always available to help with claims. Plus, worker’s comp isn’t our only specialty—we can help you find any commercial insurance policy you might need to protect your business.
Request a workers’ comp quote today or get in touch with our team to learn more about your insurance requirements.
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