Alabama Workers Compensation

Workers compensation is a good idea for any business with multiple employees, even if you’re not required by law to carry the coverage. An Alabama workers comp insurance policy protects your employees if they’re injured on the job and can protect you from litigation. If you own a business in Alabama or send employees to work in the state, you’ll need to understand the specific rules for workers comp within the state.

What is Workers Compensation?

Workers compensation is a type of insurance that provides income and medical benefits when an employee is injured, becomes ill, or dies during the course of their job duties. Death benefits are paid to the survivors of the employment if a fatality occurs. Workers comp doesn’t protect you from the liability of the accident, but it covers the costs associated with the accident or illness. It also protects you from some lawsuits.

Understanding Workers Compensation in Alabama

Every state sets up their workers compensation requirements differently. If you have employees in Alabama, it’s important to understand the specific regulations within the state.

  • In Alabama, businesses with five or more employees, part-time or full-time, must have workers compensation coverage. Officers of corporations and members of LLCs are included in that total.
  • Subcontractors and independent contractors are not covered by an employer’s coverage and must carry their own.
  • Domestic employees, farm employees, casual employees, and municipalities with less than 2,000 citizens are exempt from workers compensation in Alabama.
  • Sole proprietor or partners are excluded from coverage but can opt in.
  • Corporate officers and members of LLCs are included but may opt out.
  • Coverage is available through a private market in Alabama.

Employers in Alabama have five options for workers compensation coverage:

  1. Commercial insurance through the voluntary market. This is the standard purchase of coverage through the private market.
  2. Commercial insurance from the assigned risk pool. An option for businesses who cannot find coverage in the private market. Coverage is purchased through an insurance agent and administered by the National Council on Compensation Insurance (NCCI). Rates are higher.
  3. Group self insurance. Employers can form a group and pool their liabilities to provide coverage at a lower cost. Employers within the group must meet specific requirements, and there is no guarantee membership will be renewed from year to year.
  4. Individual self insurance. An option for financially stronger employers, this requires a long-term commitment as some benefits last a lifetime. Instead of paying premiums to an insurance company, the employer pays benefits directly to the employee. Employers must apply to self insure and meet several requirements.
  5. Employee leasing. This option is not an alternative to workers compensation coverage, only an employment alternative. Signing up with a leasing company transfers employees to the leasing company, and employers “lease” them back. The employer is responsible for paid wages, taxes, and benefits, and the leasing company is responsible for workers compensation coverage. Choose a leasing company wisely. If the company is not in compliance with the law, the employer assumes the same risk as if they had not provided workers compensation coverage at all.

Understanding Alabama workers compensation requirements will protect you and your employees. If you have any questions about your current policy or would like a quote on a new policy, contact our team of workers compensation insurance experts. We’re here to help!

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