Why Do Alabama Employer’s Need Worker Compensation Coverage?
In Alabama, the Workers Compensation Law requires insurance coverage by all non-agricultural employers that have five or more employees, whether part-time or full-time workers. The law requires specific worker’s compensation benefits for employee injuries that occur or arise from the course of employment.
What is the Cost of Not Getting Worker’s Comp Insurance?
The law requires coverage unless the employer is exempt. For example, the law does not cover agricultural employers or those with four or fewer employees. Covered employers that do not get insurance can face fines, penalties, and are subject to civil liability for workplace injuries.
Worker’s Compensation law protects the employer and the employee. For the employee, covered injury or illness results in certain or guaranteed benefits. The employee has a right to fair compensation under the schedule of benefits. Under current law, the employee benefits include medical expenses and long-term care, lost wages, and benefits.
The law protects employers by insuring losses that arise out of or occur in the course of employment. These include occupational diseases and benefits for survivors in the event of deaths. As the exclusive remedy, the Worker’s Comp Law removes the individual’s right to sue for damages. For example, the employer may not be liable in civil actions except for cases of gross or extreme negligence.
Buying Workers’ Compensation in Alabama
Employers can get coverage from any of the following five methods:
Purchase commercial insurance from a licensed insurance provider
The voluntary market is the easiest method for most firms to get coverage. The Alabama State Department of Labor maintains a list of approved insurance providers and their registered brokers and agents. Participation is subject to commercial ratings and approval. Employers can get rate increases after the first year, and some insurers do not guarantee renewal.
Purchase commercial insurance from the assigned risk pool
Employers that cannot get approvals from commercial insurance providers can get insurance coverage in the assigned risk pool or the involuntary market. The likely participants include employers with high risks and significant histories of claims. The assigned risk coverage has public guarantees and widespread acceptance of Courts. To be eligible, an employer must apply and get rejected by two commercial insurance carriers. The assigned risk pool does not provide employer choice of carrier.
Gain approval for self-insurance
For many employers, self-insurance is the best and most cost-effective method for Worker’s Comp coverage. The Alabama Department of Labor must approve applications for self-insurance. An employer must meet or exceed the below-listed minimum financial qualifications.
(a) Must have audited financial statements.
(b) Must have minimum net worth of $5 million.
(c) Show current assets to current liabilities ratio of 1.0 or greater.
(d) Must demonstrate positive net income.
Participate in a group self-insurance plan
Employers can join a group self-insurance plan. Group self-insurance employers pool their assets and claims. Participation requires an application to the fund administrator and acceptance by the group. Qualification included financial capacity. Self-insurance funds offer attractive rates for employers. This type of coverage carries a risk of fund failure and the possibility of each employer having to make up any deficiency.
Contract with an Employee Leasing Company
Employee leasing arrangements can reduce costs of benefits and benefits management. They can include insurance coverage.
Instructions for Buying
Employers should purchase insurance through licensed providers and brokers, which you can find on WorkCompLab. They should get professional assistance when setting up a self-insured plan.
What You Should Know about Worker’s Comp in Alabama
The law requires Worker’s Compensation coverage for every employer unless exempt. The Worker’s Compensation law is the exclusive remedy for on-the-job injury and occupational disease; injured employees and their families may generally not bring a civil action for damages. Worker’s Comp coverage reduces employer liability, and it avoids paying double compensation, fines, and penalties.
Is Your Business Required to Carry Insurance?
The Workers Compensation law exempts Employers that regularly use less than five full or part-time employees unless the business involves building or assistance on construction sites for single-family detached homes. The law does not require coverage from municipalities of 2,000 persons or fewer, employers for farm labor and casual employees. These employers can elect coverage and purchase or provide insurance protection for employees.
Where to Buy Insurance
Employers can buy insurance in the voluntary market from insurance agents and brokers, in the involuntary market from assigned providers, and in self-insurance. Employers can buy individual self-insurance plans or participate in a group plan for which they may be eligible such as a business group or trade association plan.
How Much Does Worker’s Comp Insurance Cost?
The costs of Worker’s Compensation insurance varies from state to state as the laws and economic conditions differ. In the state of Alabama, the average cost is $1.19 per $100 of wages paid. The $1.19 per $100 in wages ratio is an average that goes across a wide range of occupations and business forms. For example, in Alabama, many business associations offer group self-insurance for members. These plans feature low payments and flexibility for employers.
List of Places for Worker’s Comp or More Information
The Alabama government maintains helpful lists and information for referrals. The available information includes names, addresses and telephone numbers of insurance providers, agents, brokers, and approved group self-insurance funds. To request information for any situation, employers can contact the Workers’ Compensation Division of the Alabama Department of Labor or by phone to the Self-Insurance Section at 1-800-528-5166.
The Alabama Department of Labor, Worker’s Compensation Division offers assistance to all Alabama employers faced with understanding and compliance with the Workers Compensation Law. Employers can also get advice, information, and options on coverage costs and rates from qualified insurance agents and brokers.
The Worker’s Compensation Division maintains lists of active insurance providers, brokers, and agents.
Factors that Impact Coverage
Legal liability is a factor in setting rates along with claims history. Some businesses regularly involve occupations or activities with higher than usual risks. Workers’ Compensation insurance providers use underwriting to determine risk. They can refuse coverage completely, or insurers can rate the coverage for higher premiums due to risks.
Helpful TipsEmployee Leasing Companies-
Employers that use employee leasing arrangements must be certain that the leasing company complies with the withholding and payments required for worker’s compensation coverage. The ultimate responsibility for Worker’s Comp coverage remains with the employer.
Pending Worker’s Comp Law Changes
A Jefferson County Judge ruled that the Alabama Workers Compensation Law was unconstitutional because of limits on compensation and attorney fees. The state had not revised the compensation rate for many years, and the court agreed that the low limit on legal fees tended to inhibit effective legal representation.
Because the Judge found two parts of the law unconstitutional, his ruling struck down the entire law. Many legal experts suggest that the ruling will not affect the conduct of cases going forward until the Alabama Legislature can take up the issue later in the year.
Employers must watch for potential changes in the law with effects on coverage, liability, and fees.
The Alabama Workers Compensation law is an essential part of the state’s effort to maintain insurance protection in the event of employee injury or death arising out of or occurring in the course of employment. It is the employee’s exclusive remedy for covered injuries and the well being of Alabama workers and their families.
The State of Alabama promotes safe, drug-free workplaces, and it vigorously regulates and enforces employee protections for injury.