An Alabama grocery store cashier was diagnosed with bi-lateral carpal tunnel syndrome. A carpenter sustained an arm injury due to repetitive motion on the job. After surgery he was unable to return to his former occupation due to permanent movement restrictions. An employee of an Alabama financial firm slipped and fell on the steps of a hotel while attending an out-of-town conference. She broke both ankles. A driver training instructor was injured in a collision while a student was driving. He sustained whiplash and aggravated a preexisting back injury.
Work-related injuries happen every day, from simple trips and falls to serious, life-altering injuries. Employees need help paying for medical bills when they are injured on the job. Workers’ compensation insurance is designed to protect employees from the costs of workplace injuries, and it also protects employers from lawsuits and unpredictable costs.
The Alabama Workers’ Compensation Law is the exclusive remedy for on-the-job injuries and occupational diseases. While it protects workers, Alabama workers’ compensation insurance also limits employers’ civil liability in these circumstances, and allows employers to avoid double compensation, penalties and fines.
Under the Alabama Workers’ Compensation Law, employees are guaranteed certain benefits in the event that they become injured or ill at work. The employer pays for the insurance, and in return is protected by the “exclusive remedy” provision of the law (employees are only entitled to the workmans’ comp benefits required by law, and cannot sue the employer for liability).
Who Is Covered?
Alabama employers are required to carry workers’ compensation insurance if they have five or more full- or part-time employees working in the state. Employers with less than five employees are exempt from this requirement.
Sole proprietors and partners are not required to be covered but can elect to cover themselves. Corporate officers and members of an LLC are included in coverage, but can elect to be exempted.
Employers in the construction industry with one or more employees must purchase Alabama workers’ compensation insurance.
Employers of domestic workers, farm laborers, and casual employees, and municipalities having a population of less than 2,000, are not required to provide coverage, but can elect to purchase it.
What Is Covered?
Alabama workers’ compensation insurance covers injuries that occur due to workplace accidents. It also provides benefits for occupational illnesses (illnesses that arise due to the conditions in a workplace). If an employee’s workplace injury or occupational illness causes death, Alabama workers’ compensation insurance may pay death benefits to the surviving spouse or dependents.
Alabama workmans’ comp insurance pays for medical bills related to an employee’s work-related injury or occupational disease. It also pays mileage and wage reimbursement related to the workplace injury or illness.
Where Can You Buy It?
Alabama has a private workmans’ comp insurance market. Coverage can be purchased from any private insurance company or agency that is licensed to sell it in the state of Alabama. Employers can also obtain coverage through a group self-insurance fund in which employers agree to pool their liabilities for the purpose of providing Alabama workers’ compensation insurance to their employees. Financially strong companies that meet certain requirements can self-insure.
Assigned risk placement is also available if two standard market carriers turn down an employer for Alabama workmans’ comp coverage. Alabama’s assigned risk pool is a high-cost option that allows high-hazard employers to get the coverage they need.
Workers’ compensation insurance always costs more for industries and occupations that are presumed to have a higher risk of occupational injuries or illnesses. Your premiums are determined by how many employees you have, the types of jobs they perform, and your history of accidents and workers’ compensation claims.
In Alabama, the National Council for Compensation Insurance (NCCI) assigns classification codes for each occupation. Each class code is given a recommended base rate for workers’ compensation insurance. To determine the total premium, an employer’s annual payroll at the beginning of the policy period is divided by 100, and then multiplied by the base rate. Consider the following example:
Most employers have employees in more than one classification. All applicable classifications and related premiums will be combined to determine the annual Alabama workers’ compensation insurance premium.
Insurance companies in Alabama must file their rates with the Department of Insurance. They are allowed to offer certain state-approved discounts and credits. Premiums are approved and regulated by the Alabama Workers’ Compensation Division and must remain within the guidelines recommended by the NCCI.
The NCCI sets a low rate and a high rate for each Alabama class code. Rates vary by insurance company underwriting standards. Alabama workmans’ comp rates have been decreasing over the last few years.
Here are some sample base rates (rate per $100 of employer payroll) as of March 1, 2016:
Experience rating allows employers with good safety records to get a credit on their Alabama workmans’ comp premium. An experience modification factor, or experience mod, is applied to qualifying workers’ compensation premiums. It increases or decreases the Alabama workmans’ comp premium for a given year.
The experience mod is a numerical representation of your actual losses as compared to expected losses for similarly sized businesses in your industry. The mod is applied to your premium as a debit or credit.
The formula for experience-rated Alabama workers’ compensation premium is:
Consider how the mod affects the premium in the examples below:
Alabama employers can receive experience-rated workers’ compensation insurance when they generate:
Alabama workmans’ comp insurance is very complex and is governed by a set of very specific rules and regulations. Failure to comply can lead to steep fines and penalties for your business.
We have offered a variety of highly simplified examples. To learn more about Alabama workers’ compensation insurance and obtain quotes, you need an experienced and knowledgeable independent insurance agent.
A Trusted Choice® agent can help you understand Alabama’s workers’ compensation laws and will help you get the coverage you need to protect your employees and your business.
Start your search for a local Trusted Choice agent now.