Workers’ Compensation laws and insurance rules by state

Know the mandates and requirements to keep your small business in compliance.

Karen Solomon
By Karen Solomon
Published Mar 20, 2024
Link copied!
Septembers Blog Post 2 1

Workers’ compensation insurance often meets state mandates and lets employees know they’re protected if they get sick or hurt on the job. As a business owner, it’s essential to know your local workers’ compensation laws and how they affect you, your business and your workers.

How much do you know about the workers’ comp laws that matter most? Jump ahead to learn:

What are Workers’ Compensation laws?

Workers’ compensation insurance can help provide employees with medical benefits and wage replacement if they’re injured or contract an illness on the job. Business owners buy a policy to cover their employees.

Self-employed workers (“solopreneurs”) can also get workers’ comp insurance to help protect themselves.

Workers’ compensation insurance laws exist for two reasons: To protect employees and business owners.

Workers’ Compensation laws to protect employees

The potential for insurance coverage to help cover medical expenses and wages can be a huge benefit for employees. If a worker gets injured or sick on the job, it can be essential for keeping a working family afloat.

Workers’ comp laws can also save workers time and energy. Instead of suing an employer and enduring the effort and costs of a legal case, workers can be reimbursed by an insurance policy. And if their illness or injury meets the criteria for coverage, workers’ compensation insurance can eliminate the risk of loss in a court case — in which they may receive nothing.

Workers’ Compensation laws to protect employers

Insurance premiums are a small price to pay when you consider the alternative cost potential for business owners — lawsuits and out-of-pocket expenses.

If a worker breaks their leg on the job and you don’t have workers’ comp coverage, out-of-pocket costs for covered events like ambulance, hospital fees and rehab could put your business at financial risk.

Carrying workers’ comp also helps you position yourself as a professional in your field. For example, if you’re in construction, workers’ compensation for contractors is often a requirement for getting licensed and bidding on contracts. If you don’t have it, your company won’t even be considered for the job.

Workers’ compensation laws (formerly known as workmans comp laws) are created by and unique to each U.S. state. And every state dictates coverage requirements that employers need to provide for their employees.

Each state’s unique laws spell out:

  • When/if workers’ compensation insurance is required.
  • Who is eligible to make a claim.
  • How an insurance claim must be filed, for what reason and when.

Workers’ Compensation rules by state

The laws and rules around workers’ compensation insurance coverage and claims vary depending on where you operate your business.

Purchasing workers’ comp is often mandatory, but employers must proactively go out and buy it on their own.

Learn more about workers’ compensation insurance coverage.

State Rules on Workers’ Compensation Insurance

Is Workers’ Comp required?Laws and rules
Alabama Workers’ CompYesRequired for any business of 5+ employees, and anyone in construction of single-family homes
Alaska Workers’ CompYesPart-time, temporary, family members and friends who are employees must be included in coverage
Arizona Workers’ CompYesWorkers’ comp can cover up to $5,000 in burial expenses, and survival benefits can be up to 66% of the employee’s average monthly wage
Arkansas Workers’ CompYesEmployers must display a poster with claim filing instructions in the workplace
Colorado Workers’ CompYesCoverage is required for any business with 1+ employees
Connecticut Workers’ CompYesAny business that fails to obtain workers’ comp is subject to penalty fees of $100 per day
Florida Workers’ CompYesSome business owners, officers and members of an LLC business are eligible for a workers’ comp exemption
Georgia Workers’ CompYesWorkers’ comp is mandatory for some professional licenses and contracts like a general contractor license
Hawaii Workers’ CompYesInsurance for employees is required, but some business owners are exempt from insuring themselves
Idaho Workers’ CompYesWorkers’ comp is required before the first employee is hired, and the mandate extends to workers working from home
Illinois Workers’ CompYesAny business owner who works in construction is required to carry coverage
Iowa Workers’ CompYesEmployers are required to file a First Report of Injury within four days of notice or knowledge of a work injury
Kansas Workers’ CompYesNon-agricultural businesses with a gross annual payroll of more than $20,000 must have workers’ comp
Kentucky Workers’ CompYesEmployers who fail to obtain required workers’ comp coverage are subject to a fine of $100 to $1,000 per employee
Louisiana Workers’ CompYesSeasonal workers and minors count as employees as much as full-time and part-time workers
Maine Workers’ CompYesSome employers from other states with employees working in Maine temporarily are not required to carry workers’ comp
Maryland Workers’ CompYesA worker must be hurt “on the job”, and not just at work, for insurance to help cover some costs
Mississippi Workers’ CompYesEmployers with 5+ employees must carry workers’ comp
Missouri Workers’ CompYesWorkers’ comp is optional for a business with 5 employees or fewer
Montana Workers’ CompYesHousehold and domestic employees are exempt from the workers’ comp requirement
Nevada Workers’ CompYesWorkers’ compensation benefit payments are set by the state government
New Hampshire Workers’ CompYesEmployers must have a workers’ comp policy in good standing before any employees can be hired
New Mexico Workers’ CompYesPart-time, seasonal and temporary workers, agricultural employers and nonprofit, charitable and religious organizations all count as employees
Oklahoma Workers’ CompYesSole proprietors are not considered employees and they’re not required to have coverage
Oregon Workers’ CompYesThe first offense for a business that does not follow the workers’ comp mandate can be twice the estimated premium
South Carolina Workers’ CompYesCertain real estate agents who work on commission are exempt from workers’ comp
South Dakota Workers’ CompNoThough workers’ comp is not required, the state recommends it for businesses with employees
Tennessee Workers’ CompYesIf a worker has a temporary disability from a work injury or illness, they are entitled to 110% of their wages
Texas Workers’ CompNoGoing without workers’ comp means you could be held responsible for expenses if  an employee gets hurt on the job
Utah Workers’ CompYesIndependent contractors with no employees are exempt from the workers’ comp mandate
Virginia Workers’ CompYesIf your business hires subcontractors, the workers’ comp requirement still applies — even if the subcontractor has their own coverage

Who can make a Workers’ Comp claim?

To file a workers’ comp claim, the claimant must be an employee. Their employer — you, the business owner —  must have a workers’ comp policy in good standing. And the resulting illness or injury must occur while the employee was working on the job.

In addition, there are time restraints in terms of making a claim. A workers’ compensation claim must be made in accordance with the state’s deadline for reporting it.

Many on-the-job illnesses or injuries could be a valid reason for a workers’ comp claim. This could include cases when an employee:

  • Breaks an arm falling from a ladder
  • Gets sick from chemicals used at work
  • Experiences hearing loss from a loud work environment
  • Gets carpal tunnel syndrome from repetitive work-related tasks

A successful workers’ compensation claim could include reimbursement for:

  • Medical expenses
  • Loss of income
  • Job retraining
  • Permanent injury
  • Survivor benefits

Learn how to file a workers’ compensation claim at NEXT.

A workers’ comp claim could be disputed or denied for several reasons, including:

  • If the employee was performing a task in violation of the policy. This is particularly relevant in more dangerous jobs where covered and non-covered activities are explicitly detailed.
  • If the employee was drunk or under the influence of drugs.
  • If the injury or illness is not related to work.

How NEXT helps protect employers and employees

NEXT is 100% dedicated to helping small business owners find the right business insurance.

With our streamlined application, you can get a quote, see coverage options and purchase coverage in about 10 minutes. You can access your certificate of insurance and your policy online any time, 24/7.

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

Start a free online quote with NEXT today.

The information provided on this article does not, and is not intended to, constitute legal advice.  All information available on this page is for general informational purposes only, and you should consult an attorney with specific questions about your own business.

banner get business insurance in 10
Karen Solomon
About the author
Karen Solomon is a Senior Content Marketing Editor for NEXT. Her writing and editing has been serving small business owners and startups for several years.

There’s a lot to love about NEXT

Business insurance in less than 10 minutes

Get insurance in less than 10 minutes and you can save up to 25% in discounts*

Tailored business insurance

Unique, flexible coverage with easy monthly payments

Get business insurance online

Do it all 100% online or talk to a licensed U.S.-based advisor

What we cover
Chat with Us

Mon – Fri | 8 a.m. – 5 p.m. CT

© 2024 Next Insurance, Inc. 975 California Ave, Palo Alto, CA 94304, United States
Better Business Bureau
Issuance of coverage is subject to underwriting. Not available in all states. Please see the policy for full terms, conditions and exclusions. Coverage examples are for illustrative purposes only. Your policy documents govern, terms and exclusions apply. Coverage is dependent on actual facts and circumstances giving rise to a claim. Next Insurance, Inc. and/or its affiliates is an insurance agency licensed to sell certain insurance products and may receive compensation from insurance companies for such sales. Policy obligations are the sole responsibility of the issuing insurance company. Refer to Legal Notices section for additional information.

Any starting prices or premiums represented before an actual customer quote are not guaranteed and are representations of existing premiums of active policies as of December 6, 2023. 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.