The world of business insurance can be complicated. When it comes to workers’ compensation insurance, a type of insurance policy that protects businesses and employees in the event of a workplace injury, some business owners may wonder if workers’ comp is required by law or if it’s simply a proactive measure. Generally, state laws regulate workers’ compensation insurance. This means that business owners should evaluate their state’s local laws to determine whether they need to purchase a workers’ comp policy.
Each state has its own requirements and regulations surrounding workers’ compensation insurance, such as whether or not it is legally required, how much coverage must be provided by the policy, workers’ comp exemptions for certain businesses, and more.
States That Require Workers’ Compensation Insurance
The following states (which is all but 5 states) all require workers’ compensation insurance for businesses with one or more employees, unless otherwise noted:
- Alabama — Coverage is required for businesses with 5 or more employees.
- Arkansas — Coverage is required for businesses with 3 or more employees.
- District of Columbia
- Florida — Coverage is required for businesses with 4 or more employees.
- Georgia — Coverage is required for businesses with 3 or more employees.
- Michigan — Coverage is required for businesses with 3 or more employees or businesses that employed one or more workers for 35 or more hours per week for 13 or more weeks during the preceding 52 weeks.
- Mississippi — Coverage is required for businesses with 5 or more employees.
- Missouri — Coverage is required for businesses with 5 or more employees.
- New Hampshire
- New Jersey
- New Mexico — Coverage is required for businesses with 3 or more employees.
- New York
- North Carolina — Coverage is required for businesses with 3 or more employees.
- Rhode Island
- South Carolina — Coverage is required for businesses with 4 or more employees.
- South Dakota
- Tennessee — Coverage is required for businesses with 5 or more employees.
- Virginia — Coverage is required for businesses with 3 or more employees.
- West Virginia
- Wisconsin — Coverage is required for businesses with 3 or more employees or businesses with 1 or more employees who have been paid $500 or more in a calendar quarter.
Monopolistic State Funds
Some states that require workers’ comp insurance mandate that coverage must be purchased through a state fund rather than a private provider. Those states are:
- North Dakota
Although businesses in those states must purchase their coverage from the state, they may also want to consider getting additional coverage from a private provider. Monopolistic state funds typically do not offer liability insurance, which protects the business from lawsuits filed by injured workers.
States That Do Not Require Workers’ Compensation Insurance
Texas is the only state that doesn’t generally require workers’ compensation insurance, except for construction and government work.
The Risks of Not Carrying Workers’ Compensation Insurance
Whether your state requires that you have a workers’ compensation policy or not, there are inherent risks that business owners and workers take if they do not have a comprehensive workers’ comp policy. For those in states that require workers’ comp coverage, not having a workers’ comp policy could result in severe penalties. Although penalties vary by state, some of the possible ramifications of not meeting state requirements are fines, criminal charges, and more.
For businesses whose states do not require workers’ comp coverage, there are not usually legal ramifications for a lack of coverage. However, any business owner, independent contractor, or sole proprietor without workers’ comp insurance runs the risk of an on-the-job injury threatening the livelihood of their business and personal finances. Regardless of your line of work, ask yourself if you could afford to run your business, support your employees, or pay your bills if a serious work injury occurred.
From medical bills to lost wages to legal fees in the event an employee files suit, most business owners can agree that the potential financial strain of a workplace injury could be devastating. Workers’ compensation insurance helps mitigate these risks and provides financial support in the event of an on-the-job injury.
Cerity — Faster, More Affordable Workers’ Compensation Insurance
At Cerity, we make understanding and securing comprehensive workers’ compensation insurance simple. Whether your state requires coverage or not, we know that for many businesses, workers’ comp is a must. That’s why we offer a faster, more affordable, and more flexible way to get a workers’ comp quote.
Get a free workers’ compensation quote today with our free online quote tool. We’ll help you get the coverage you need so you can get back to doing what you do best.