Alabama requires every business with five or more employees to provide workers’ compensation insurance.
Alabama state law requires most public- and private-sector employers to provide workers’ compensation insurance. The law defines employers as any person or entity with five or more employees. The term “employee” applies to all full-time or part-time employees, officers of a corporation, or members of a limited liability company.
Employers that are not required to provide workers’ comp coverage include those that employ:
However, employers with workers in the above four categories may elect to include them voluntarily in their workers’ compensation program.
Alabama contractors involved in the construction of single-family dwellings can file for a workers’ comp exemption. Once granted, the exemption removes liability for workplace accidents from the person or company that does business with the contractor.
In other words, if one of the contractor’s employees gets injured on a job that another person or business commissions, that person or business won’t be liable for providing workers’ comp benefits to the injured worker.
It depends on your status. Sole proprietors don’t have to include themselves in their business's workers’ comp insurance. However, they must comply with the state’s rules for covering employees. The same is true for business partners.
The situation changes for corporate officers and LLC members. Corporate officers must be included in workers’ comp but may elect to request an exemption if they believe they don’t need or want the protection. The same is true for LLC members.
Corporate officers and LLC members who wish to be exempt must file a form with their workers’ compensation insurance company. Ask your company for the correct form to use.
Alabama business owners can compare quotes and purchase a policy from private insurance companies. (Insureon offers this service with its free online application.) If they’re unable to get insurance from two commercial insurers, they 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 your 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:
The estimated workers’ comp expense for Alabama employers is $1.10 per $100 in covered payroll, according to the National Academy of Social Insurance [PDF].
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:
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:
In addition, family members who can prove they depended on the deceased worker in the past may be eligible for death benefits. This includes:
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 payments. 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 multiple carriers.