Workers’ Compensation in Alabama

• Is Workers’ Compensation in Alabama required?
• How does Workers’ Comp work in Alabama?
• How much is Workers’ Compensation in Alabama?
• Who is exempt from Alabama Workers’ Comp insurance?
• How NEXT helps Alabama small business owners

Is Workers’ Compensation in Alabama required?

As stated by the Alabama Department of Labor, it is required by law that all businesses involved in the construction of new single-family, detached residential dwellings must have Alabama workers’ compensation insurance.

In addition, any business with five or more employees must also carry workers’ compensation insurance. 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.

Other requirements exist for Alabama employers. In the event of a work-related employee injury or illness, the state requires them to submit a First Report of Injury form within 15 days after the date that the injury occurred. A Supplementary Report is also required within 10 days of the first payment of compensation.

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How does Workers’ Comp work in Alabama?

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

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

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

1. Commercial insurance through the voluntary market. Employers can purchase insurance through a licensed insurance agent. This option is recommended for businesses with a low to medium worker’s comp risk or claims history.
2. Commercial insurance through an assigned risk pool. Employers can also opt to 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 businesses with a medium to high worker’s comp risk and claims history.
3. Group self-insurance is an option if your business wishes to pool liabilities with other businesses. You must meet the requirements for self-insurance to qualify.
4. Individual self-insurance means that you can pay benefits directly to your 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 receive permission from the state to self-insure.

Without workers’ compensation, Alabama business owners must cover their own expenses if their employees get hurt on the job. If you’re a business owner, you could 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 workers comp requirement. Since some clients require proof of coverage before signing a contract, failure to obtain workers’ comp insurance could also limit your business opportunities with some clients.

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 could be eligible for income benefits through workers’ compensation in Alabama, such as:

• 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’re 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.

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How much is Workers’ Compensation in Alabama?

Workers’ compensation costs vary across industries. Factors that influence price include:

• The number of employees and the type of work they do.
• Your total payroll.
• Your insurance claims history.
• The locations where you do business.

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Who is exempt from Alabama Workers’ Comp insurance?

Most Alabama businesses with fewer than five employees (including corporate officers or LLC members) are not required to carry workers’ compensation insurance. 

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

• 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 might benefit from coverage that could help protect the financial health of their business.

How NEXT helps Alabama small business owners

NEXT offers an easy way to get a free workers’ compensation insurance quote, purchase coverage and instantly share a certificate of insurance in about 10 minutes.

NEXT strives to resolve every claim quickly. Learn more about our claims process and how our claims advocates will work with you after an employee injury.

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