Alabama Workers’ Compensation insurance

Jump ahead to learn:

• Is AL Workers’ Compensation required for my business?
• How does Workers’ Compensation in Alabama work?
• Who qualifies for exemptions from Workers’ Comp insurance in Alabama?
• How much does Workers’ Compensation insurance in Alabama cost?
• Alabama Workers’ Compensation FAQ
• How ERGO NEXT helps protect Alabama business owners

Is AL Workers’ Compensation required for my business?

Workers’ compensation insurance in Alabama is required for most businesses with five or more employees — full-time or part-time. Under state of Alabama workers’ comp law, this requirement applies to corporate officers and LLC members. If you have five people on payroll, you likely need coverage.

There’s one exception: If your business is in construction building new single-family, detached residential dwellings, you’re required to carry workers’ comp after you hire your first employee.

Even if workers’ compensation insurance is not required by the state, some clients will want proof of workers’ comp coverage before they’ll sign a contract with you. A certificate of insurance (also called a COI) shows the details of your policy, and ERGO NEXT lets you create and share unlimited COIs at no extra cost.

How does Workers’ Compensation in Alabama work?

According to the U.S. Bureau of Labor Statistics, private industry employers reported almost 2.5 million nonfatal workplace injuries and illnesses nationwide in 2024. For Alabama small businesses, the right coverage in place before an incident could be far less costly than facing those claims uninsured.

If a work-related injury or illness happens, the Alabama Department of Labor provides a structured process to help your employee get care and benefits — and helps protect your business from some personal injury lawsuits tied to that injury.

Here’s how the process works:

1. Report the injury. Employees should report the work-related injury or illness to their employer as soon as possible. Employers must submit a First Report of Injury within 15 days of the injury. If compensation is paid, a Supplementary Report is also required within 10 days of that first payment.
2. Get medical care. Employees should seek authorized medical care right away. In Alabama, the employer and insurance carrier generally have the right to direct injured workers to an authorized treating physician.
3. The insurer reviews the claim. Your workers’ comp insurance carrier reviews the claim and determines what benefits apply based on the nature and severity of the injury. Alabama operates under a no-fault system, so benefits could be paid regardless of who caused the accident.
4. Benefits are paid. If the claim is approved, the insurer coordinates payment for authorized medical treatment — which can include doctor’s visits, hospitalization, surgery, physical therapy, prescriptions and mileage reimbursement for travel to medical appointments — as well as a portion of lost wages if the employee can’t work.
5. The employee returns to work or receives ongoing benefits. Once the employee is medically cleared, they can return to their role. If the injury results in a permanent impairment or prevents the employee from returning to work entirely, ongoing disability or vocational retraining benefits may apply.

Alabama workers’ compensation operates under an exclusive remedy rule. This means that when employees receive workers’ comp benefits, they generally waive the right to sue their employer for negligence related to that injury.

Alabama Workers’ Comp income benefits

Alabama workers’ compensation income benefits are governed by the Alabama Workers’ Compensation Act. Benefits depend on the nature and severity of the injury. Here’s how each type works:

• Temporary total disability (TTD): Employee can’t work at all while recovering; they receive 66 2⁄3% of their average weekly wage. There’s a three-day waiting period before TTD payments begin (and this is waived if disability lasts more than 21 days).
• Temporary partial disability (TPD): Employee returns to work with restrictions at reduced pay; they receive 66 2⁄3% of the difference between pre-injury and current wages, subject to the TTD maximum.
• Permanent partial disability (PPD): This could kick in if the employee has a lasting impairment but they can still work in some capacity. Benefits are based on the impairment rating.
• Permanent total disability (PTD): This benefit could help if an employee is permanently unable to perform any consistent work. They could receive ongoing weekly benefits at the PPD rate, subject to the state’s maximum and minimum.

Alabama Workers’ Comp death benefits

In the unfortunate event of an employee’s death from a work-related injury or illness, Alabama workers’ compensation provides support for surviving dependents. Here’s how death and survivor benefits works in AL:

• Surviving spouses and dependent children can receive up to 50% of the deceased worker’s average weekly wage if there is one dependent, scaling up to 66 2⁄3% for multiple dependents, paid for up to 500 weeks total.
• Funeral and burial expenses could be covered up to $6,500.
• If the employee leaves no dependents, a one-time lump-sum payment of $7,500 is made to the deceased worker’s estate within 60 days.

Who qualifies for exemptions from Workers’ Comp insurance in Alabama?

In Alabama, some types of businesses and workers may be exempt from the workers’ comp coverage requirement. Here’s who may qualify:

• Businesses with fewer than five employees (outside of single-dwelling residential construction) aren’t required to carry workers’ comp for their workers. This threshold includes all employees — full-time, part-time, corporate officers and LLC members. Residential construction is the exception. If your business constructs new single-family, detached residential dwellings, you must carry workers’ comp starting with your first employee.
• Sole proprietors and partners aren’t considered employees under Alabama law, so they generally aren’t required to cover themselves.
• Corporate officers and LLC members can elect to be exempt from coverage, but the election doesn’t remove an employer’s responsibility to cover employees. If you’re an officer choosing to opt out, you’ll need to file that election with the AL Department of Labor.

Additional exemptions under Alabama law include:

• Agricultural farm laborers.
• Domestic workers (household employees).
• Casual employees whose work is not in the usual course of the employer’s business.
• Employees of municipalities with populations under 2,000 according to the most recent federal census.
• Licensed real estate agents operating under a licensed broker.

Important: Workers’ comp coverage could provide an important layer of financial protection — and legal insulation — even if it’s not legally mandated. Without it, employees could sue you personally to recover medical expenses or lost wages after a workplace injury.

How much does Workers’ Compensation insurance in Alabama cost?

Workers’ comp insurance costs in Alabama vary across industries and businesses. Some factors that could influence what you’ll pay for workers’ comp in Alabama include:

• Your number of employees.
• The type of work your employees do and their assigned class codes.
• Your total payroll.
• Your insurance claims history and workplace safety record.
• The locations in Alabama where your employees work.

The best way to find out what coverage will cost for your specific business is to get a free quote from ERGO NEXT.

How ERGO NEXT can help protect Alabama business owners

ERGO NEXT has workers’ comp insurance that’s fast and flexible — and you can buy it 100% online in about 10 minutes.

Get unlimited certificates of insurance at no extra cost, and manage your policy 24/7 via web or mobile app.

If you have questions, our licensed, U.S.-based insurance professionals are available to help.

Start a free quote with ERGO NEXT.

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