Workers' Compensation Insurance in Alabama

Workers Comp 
Workers' Compensation Insurance in Alabama

The State of Alabama requires all businesses with five or more employees, and all construction businesses regardless of their number of employees, to purchase workers’ comp.

Workers’ comp helps cover the cost of medical bills, disability benefits, and lost wages due to work-related injuries or occupational diseases. 

Workers’ comp can be confusing in Alabama, but Hourly makes it easy with a simple, automated system and accurate, pay-as-you-go pricing.

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How Does Workers’ Comp Work in Alabama?

In Alabama, you can purchase workers’ comp from a private insurance company or, if you’re unable to buy from commercial insurers, from the Alabama Assigned Risk Pool. 

If you meet certain requirements, you may also have the option to self-insure. Self-insurers need to have a net worth of $5 million, an assets-to-liabilities ratio of at least 1, and a positive net income for each of the past three years.

Alabama employers have a three-day waiting period, after which they’re required to cover medical expenses and at least part of the wages lost by an injured worker. Workers’ comp coverage in Alabama includes:

  • Medical treatment and physical therapy
  • Two thirds of an employee’s lost wages
  • Re-training if the employee is no longer able to do their old job
  • Benefits for temporary total disability, permanent partial disability, and permanent total disability
  • Death benefits paid to dependents

The first Alabama workers’ compensation law was passed in 1919. Today, the Alabama Department of Labor’s Workers’ Compensation Division regulates workers’ comp.

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What Does Workers’ Comp Cover?

Alabama businesses can use workers’ comp to cover a number of work-related injuries and illnesses, such as:

  • Sprains, fractures, and breaks
  • Lacerations (cuts or tears) 
  • Burns 
  • Allergic reactions
  • Carpal tunnel 
  • Other illnesses or injuries caused by work

Workers’ comp covers medical treatment for these and other conditions. It also covers lost wages if the employee is forced to take time off work to recover; disability benefits if the injury or illness significantly impairs the employee; and funeral expenses if the injury or illness causes the death of the employee.

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How is Workers’ Comp Calculated?

Traditional workers’ comp is calculated based on your estimated payroll, industry and type of work, state law, and your claims history.

At Hourly, we price based on your actual payroll, so there are no averages or estimates, and we keep premiums to a minimum. 

Traditional policies are also subject to audits at the end of the year, but we help you avoid this by calculating the most accurate amounts possible right from the start.

FAQs About Alabama Workers' Comp 

Who qualifies for workers’ compensation insurance in Alabama?

Alabama state law requires any business with five or more employees (part-time or full-time) to carry workers’ comp. But there are certain employees who don’t need workers’ comp coverage:

  • Farm workers
  • Domestic workers in private homes
  • Employees without guaranteed work hours, such as independent contractors
  • Employers located in a municipality with a population under 2,000

Even if you aren’t required to have workers’ compensation coverage, it’s still a good idea to carry it so you can be prepared for any work accidents that may happen and help your employees cover medical costs.

How does workers’ comp insurance pay in Alabama?

In Alabama, workers’ comp pays two-thirds, or 66%, of an employee’s average weekly wage. The average weekly wage is calculated from the employee’s earnings for the 52 weeks before the accident or injury, as reported on their Federal W-2 form.

What is the maximum workers’ comp in Alabama? 

In Alabama, the maximum amount an ill or injured employee can receive is $1,084 per week, and the minimum is $298 per week. These apply to all on-the-job injuries occurring on or after July 1, 2023. 

What is the penalty for not having workers’ compensation in Alabama?

The penalty for not having workers’ comp in Alabama is a fine of $1,000 per employee, multiplied by the number of days without coverage. You may also be ordered to close your business until you purchase workers’ comp, and you may face jail time and/or additional fines.

How do workers’ compensation claims work in Alabama?

To provide and receive benefits, employers, employees, and insurance carriers must follow a certain time-sensitive process:

  1. Employers must fill out a first report of injury form within 15 days of the date the injury took place or was reported to the employer. 
  2. Insurers must pay the first installment within 30 days of receiving a claim.
  3. Insurers must file a supplementary report with the state within 10 days of making the first payment.

The Alabama statute of limitations for workers’ comp is two years.

Get a Free Alabama Workers’ Compensation Insurance Quote 

Need an easier, more affordable way to provide workers’ compensation benefits to your employees? Hourly is here to help. 

We offer a pay-as-you-go system with amounts taken from your actual payroll in real-time, so you can skip audit fees, premiums, and spending hours of your precious time running numbers through a calculator. Try it out today.

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