Alabama workers' compensation insurance

In Alabama, businesses that have 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 an S corp or other corporation, 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.

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

• Domestic employees
• Farm laborers
• Casual employees

Additionally, municipalities that have a population of fewer than 2,000 residents (based on the most recent U.S. Census) are not required to provide coverage.

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 are also required by law to 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.

Additionally, here's what your workers' comp policy won't cover:

• Injuries caused by intoxication, drugs, or company policy violations
• Injuries claimed after a firing or layoff
• Wages for a replacement worker
• Occupational Safety and Health Administration (OSHA) fines

Insurance providers use a specific formula for calculating workers' comp premiums:

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.

Another option is an inexpensive ghost policy, which is a workers' comp policy in name only. It provides no benefits beyond a certificate of insurance—which you might need in certain circumstances, like signing a contract.

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

When an employee suffers a workplace injury or develops an occupational disease, workers' compensation covers the cost of their medical care. It also provides disability benefits while the employee is recovering and for permanent impairment or disfigurement.

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-thirds 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 a claimant 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 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 worker's spouse and children are eligible for death benefits. Other family members who can prove they depended on the deceased worker in the past might also be eligible for benefits.

Eligible family members can receive weekly death benefits amounting to no more than two-thirds of the deceased employee’s average weekly wages. Whether wholly or partially dependent, survivors can receive benefits for no longer than 500 weeks.

If the worker had no dependents, then their estate would receive a one-time payment of $7,500.

In Alabama, the employer is also responsible for paying up to $6,500 for burial expenses.

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 buy a workers' compensation policy, start a free application with Insureon to compare quotes from top-rated insurance carriers. A licensed insurance agent will help answer your questions and explain your coverage options. Once you find the right policy, you can usually begin coverage and get your certificate of insurance in less than 24 hours.