Alabama workers’ compensation insurance

In Alabama, employers with five or more employees are required to provide workers’ compensation insurance. The term “employee” applies to all full-time or part-time employees, officers of a corporation or S corp, and members of a limited liability company (LLC).

Every business owner should consider purchasing workers' compensation. It provides important financial and legal protection in the event of a work injury, including death benefits for fatal incidents.

Employers that are not required to provide workers’ comp coverage include those that hire:

• Domestic workers
• Farm laborers
• Casual workers
• Municipalities having a population of fewer than 2,000 residents (based on the most recent U.S. Census)

Employers with workers in the above categories can still choose to include them in their workers’ compensation program.

Workers' comp is especially important in industries where workers have a high risk of injury, such as construction. That's why Alabama contractors involved in the construction of single-family, detached dwellings must also carry this coverage.

Any business where workers face a risk of injury should strongly consider buying workers' comp, even when it's not required.

Even though sole proprietors and independent contractors may be exempt from workers’ compensation requirements, they should still consider it.

Your health insurance provider might deny a claim related to a work injury, which could leave you paying for expensive medical bills. Workers' comp covers medical costs and also provides part of the wages that you'd otherwise miss while recovering from an injury.

To save money on workers' comp insurance, it's important to make sure you classify your employees correctly. Employees with desk jobs or other jobs with a low risk of injury cost less to insure. This also helps you avoid misclassification fines.

In some cases, small business owners can choose to buy pay-as-you-go workers' compensation. This type of workers' comp policy has a low upfront premium, and lets you make payments based on your actual payroll instead of estimated payroll. It's useful for businesses that hire seasonal help or have fluctuating numbers of employees.

Finally, a documented safety program can help lower workers' comp costs. A safer workplace means fewer accidents, which helps keep your premium low.

Alabama business owners can compare quotes and purchase a policy from private insurance companies. Insureon offers this service with our free online application.

If you're unable to get insurance from two commercial insurers, you can buy it from the Alabama Assigned Risk Pool, which is administered by the National Council on Compensation Insurance (NCCI). You can access “last-resort” coverage through your local insurance broker after providing written proof of two insurance declinations.

Alabama assigned-risk coverage is approved by state courts and is guaranteed by the Alabama Insurance Guarantee Association.

Alabama employers who qualify can self-insure their workers’ compensation claims. This means they’ll pay for their own workers’ comp claims rather than submit them to an insurance company.

To qualify for self-insurance, Alabama employers must have:

• A net worth of $5 million
• A current assets / liabilities ratio of 1 or higher
• Positive net income in each of the prior three years

The Alabama workers' compensation law states that the employer must cover medical treatment and part of the employee's wages for missed days of work after a three-day waiting period.

Workers' compensation benefits include:

• Medical bills for a job injury or occupational disease
• Two-third of the employee's wages during recovery
• Temporary total disability benefits
• Temporary partial disability benefits
• Permanent partial disability benefits
• Permanent total disability benefits
• Vocational benefits (training for other suitable employment)
• Death benefits for fatal incidents

Policies usually include employer's liability insurance, which can help cover legal expenses if an employee blames their employer for an injury. However, the exclusive remedy provision in most workers' comp policies prohibits an employee from suing their employer if they accept workers' comp benefits.

To receive benefits, a First Report of Injury form must be filled out within 15 days from the date of injury or date the employer was notified. You can find out more through the Workers' Compensation Division of the Alabama Department of Labor.

If you operate your business without workers’ compensation insurance in Alabama, you could be fined $1,000 per employee for each day in which you failed to provide mandated coverage. Other potential penalties include:

• Being ordered to close your business until you come into compliance with the state’s workers’ comp requirement
• Criminal penalties including fines, jail time, or both

If an employee dies as a result of a work-related injury or illness, the worker’s eligible family members may receive death benefits. Eligibility is determined by a person’s relationship to the deceased worker and their degree of financial dependence on the worker.

In Alabama, the following individuals are assumed to be financially dependent on the employee:

• A surviving spouse
• Children younger than 18 who live at home with the spouse
• Children younger than 22 who are enrolled in an accredited higher education program
• Adult children who are mentally or physically unable to support themselves or who depended on the deceased worker for financial support in the past

In addition, family members who can prove they depended on the deceased worker in the past may be eligible for death benefits. This includes:

• Parents
• Siblings
• Grandparents
• Grandchildren

Eligible family members can receive weekly death benefits amounting to no more than 75% of the deceased employee’s average weekly wages. This amount can’t exceed the average weekly wage across the state.

For partially dependent survivors, the weekly benefit will be based on how much the person provided for each dependent.

Whether wholly or partially dependent, survivors can receive benefits for no longer than 500 weeks.

In Alabama, eligible family members can also receive a lump-sum payment for burial and other expenses as long as the worker died no longer than four years from the date of the injury. The lump sum is calculated on the basis of the state’s average weekly wage.

A workers’ compensation settlement is an agreement between the injured employee, employer, and insurer that will close out a workers’ compensation claim. This benefits both the employee and the employer.

Settlements in Alabama usually take the form of a lump-sum payment. However, some are paid over time, especially if the survivor lacks sufficient income.

Alabama is different from many other states in that its workers’ comp settlements don’t necessarily remove the possibility of receiving future medical benefits. The state allows an injured employee’s claim to be reopened if the person’s condition deteriorates within four years.

A workers’ comp settlement in Alabama may be reached either with a formal hearing or without a hearing.

In Alabama, the statute of limitations for workers’ comp claims is within two years of the date of injury or of the last voluntary payment of disability income benefits, whichever comes later.

If you are ready to explore workers’ comp insurance options for your Alabama business, start a free online application today to compare quotes from top-rated insurance carriers.