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Alabama Workers’ Compensation Insurance

Is Workers’ Compensation insurance required in Alabama?

In Alabama, businesses with five or more employees must have workers’ compensation insurance.1

Full-time and part-time employees, officers of a corporation and members of an LLC are all counted when determining whether this insurance is required. All businesses involved in the construction of new single-family, detached residential dwellings must have Alabama workers’ compensation insurance, even if they employ fewer than five people.

Workers’ compensation insurance provides coverage when an employee is injured on the job. It covers a number of related expenses, including:

  • Medical care
  • Lost wages
  • Permanent injury benefits
  • Death benefits

Workers’ Comp coverage options in Alabama

The state of Alabama offers four options for covering workers’ compensation liability:

Commercial insurance through the voluntary market

You can purchase insurance through a licensed insurance agent. This option is recommended for businesses with a low to medium worker’s comp exposure or claims history.

Commercial insurance through an assigned risk pool

You may purchase insurance through the assigned risk pool administered by the National Council on Compensation Insurance (NCCI). This comes with a higher cost and is recommended for medium to high worker’s comp exposure and claims history.

Group self-insurance

You may obtain coverage through a group self-insurance fund which pools liabilities with other businesses. You must meet the requirements for self-insurance to qualify.2

Individual self-insurance

You may pay benefits directly to injured employees. Individual self-insurance is recommended only for financially strong employers with a $5 million minimum net worth and a positive net income. You must submit an application to receive permission to self-insure.3

Are there penalties for not having Workers’ Comp coverage?

Without workers’ compensation, Alabama business owners must cover their own expenses if they get hurt on the job. If you’re a business owner, you may face civil lawsuits from affected employees when workplace injuries occur.

The state may impose penalties or fines for businesses that do not comply with the law. Since some clients require proof of coverage before signing a contract, failure to obtain workers’ comp insurance could also cost you business.

Who is exempt from Alabama workers’ compensation requirements?

Most Alabama businesses with fewer than five employees (including corporate officers or LLC members) do not need to have workers’ compensation insurance.

In addition, Alabama workers’ compensation laws do not apply to the employment of the following types of workers:

  • Agricultural farm laborers
  • Domestic workers
  • Casual employees
  • Workers for municipalities with populations under 2,000

Although workers’ comp insurance isn’t required in these cases, employers may decide to get coverage anyway in order to protect themselves financially.

How does Workers’ Compensation work in Alabama?

In the state of Alabama, workers’ compensation insurance provides coverage for costs related to on-the-job injuries involving employees and covered business owners. These expenses may include:

  • Emergency treatment
  • Hospital care and surgery
  • Medical appointments
  • Vocational rehabilitation
  • Mileage costs

Workers’ Comp income benefits in Alabama

If an employee experiences a temporary or permanent disability or dies as the result of a work-related accident, they are eligible for income benefits through workers’ compensation in Alabama:4

Temporary partial disability: The employee is able to return to work but has specific part-time or light duty restrictions.

Temporary total disability: The employee is unable to return to work for a period of time while recovering from their injury.

Permanent partial impairment: The employee’s injury results in a permanent impairment, though they are still able to work in some capacity.

Permanent total disability: The employee’s injury results in a permanent impairment that prevents them from performing any type of consistent work.

Death: Survivor benefits are provided when an employee dies from a work injury and leaves behind a spouse, children or other dependents. A one-time estate payment may be available for those who leave no dependents. Funeral expenses may also be paid up to $6,500.

Employer responsibilities for Alabama Workers’ Compensation insurance

Alabama employers are required to submit a First Report of Injury Form to the State of Alabama within 15 days after the date that the injury occurred. In addition, a Supplementary Report must be filed within 10 days of the first payment of compensation.5

What are the rates for Workers’ Compensation in Alabama?

The cost of workers’ compensation coverage in Alabama can vary widely from one business to the next. Each insurance provider will consider a number of different factors when determining rates for monthly premiums, including:

  • The risk of injury that your employees are exposed to
  • How many people your business employs
  • Where your business is located within the state
  • The number of years you’ve been in business
  • Your past workers’ comp insurance claims
  • How high you set your limits

How NEXT Insurance helps Alabama businesses

NEXT Insurance offers convenient and affordable workers’ compensation insurance for businesses in Alabama. Our policies are customized to each customer, which helps to ensure that you get the right coverage to protect your business while eliminating unnecessary insurance expenses.

To get a quote and apply for coverage, simply use any computer or mobile device to access our online portal. It only takes a few minutes to enter your information, review your coverage options and get a certificate of insurance.

If you have any questions, our U.S.-based insurance advisors are standing by to assist you.

Get an instant quote online today.

Other business insurance policies that are important in Alabama

If you own a business in Alabama, workers’ compensation insurance is only one of a few policies that you likely need to maintain financial stability. The following types of insurance coverage are recommended for most businesses:

General Liability insurance

General liability insurance is the most common policy for businesses. It covers workplace accidents involving someone other than you or your employees, such as customer injuries or damages to someone’s property.

Professional Liability insurance (E&O insurance)

Professional liability insurance, also known as errors and omissions insurance, provides financial protection in the event of a customer dispute. It protects against claims of professional negligence and can provide financial coverage if you make a mistake at work.

Commercial Auto insurance

If you or your employees drive for work purposes, commercial auto insurance can cover accident-related costs. You’ll need this coverage for business-owned vehicles as well as personal vehicles that you drive for work.

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* To the extent permitted by law, applicants are individually underwritten, not all applicants may qualify. Individual rates and savings vary and are subject to change. Discounts and savings are available where state laws and regulations allow, and may vary by state. Certain discounts apply to specific coverages only.