The manner or method by which you choose to insure your workers' compensation liability is your decision. Should you have any questions contact the Workers' Compensation Division at 1-800-528-5166 or (334) 956-4044.
If you regularly employ less than five (5) employees, full-time or part-time and including officers of a corporation in any one business, other than the business of constructing or assisting on-site in the construction of new single-family, detached residential dwellings, the Alabama Workers' Compensation Law does not require you to have workers' compensation insurance coverage. Employers of domestic employees, farm laborers, or casual employees and municipalities having a population of less than 2,000 (according to the most recent federal census) are not required to provide coverage but can elect to be covered by the provisions of the Alabama Workers' Compensation Law.
Why should you have workers' compensation coverage?
Alabama's Workers' Compensation Law provides significant and valuable benefit to both employer and employee. The employee is guaranteed a "benefit certain" in the event of an on-the-job injury or occupational disease. The employer pays for this insurance. The employer is protected by the "exclusive remedy" provisions of the Law. This means that an injured worker is entitled only to the benefits required by law, thus the employer's liability is limited.
The Insurance Requirement Information page is divided into 3 sections for your browsing convenience. These sections are:
WORKERS' COMPENSATION COVERAGE OPTIONS
There are five ways to cover your workers' compensation liability. You can:
OPTION (1) - Commercial Insurance - Voluntary Market
DESCRIPTION: You can purchase an approved insurance policy through a licensed insurance agent underwritten by an approved insurance carrier who will write an insurance policy for you. This is known as purchasing insurance coverage on the "voluntary market."
CANDIDATES: Any employer who has a low to medium workers' compensation exposure or claim history.
SOURCES: Purchased through your insurance agent.
ADVANTAGES: Recognized by the State Courts. Provides an approved policy at a reasonable price that is guaranteed by the Alabama Insurance Guaranty Association. Your choice of buying from the insurance carrier with the most competitive rates.
DISADVANTAGES: Insurance carrier determines whether or not to renew your policy. You are subject to rate increases.
COMMENTS: The Alabama Department of Insurance approves all insurance carriers, their policies and the agents who represent them. A directory containing the names and addresses of approved insurance carriers can be obtained from the Insurance Department.
OPTION (2) - Commercial Insurance - Assigned Risk Pool
DESCRIPTION : You can purchase insurance through the Assigned Risk Pool when insurance carriers decline to write an insurance policy for you. This is known as purchasing insurance coverage on the "involuntary market."
CANDIDATES: Any employer who has a medium to high workers' compensation exposure or claim history.
SOURCES: Administered by the National Council on Compensation Insurance (NCCI). Purchased through your insurance agent.
ADVANTAGES: Provides an approved policy that is recognized by the State Courts and is guaranteed by the Alabama Insurance Guaranty Association.
DISADVANTAGES: High cost. No choice of insurance carrier. Subject to rate increases.
COMMENTS: You must contact and be refused by two insurance carriers and make direct application to the NCCI Assigned Risk Pool through your insurance agent providing proof that the insurance carriers turned you down. Insurance carriers participating in the Assigned Risk Pool have been approved by the Alabama Department of Insurance.
OPTION (3) - Group Self-Insurance.
DESCRIPTION: You can obtain coverage by joining a group self-insurance fund. This is a common fund into which employers have, by agreement, pooled their liabilities for the purpose of providing Alabama workers' compensation benefits to their employees.
CANDIDATES: Any employer who is willing to enter into an agreement to pool their workers' compensation liabilities and who meets the underwriting requirements set forth by the Fund. Requirements Of Qualification For Self-Insurance
SOURCES: Purchased through your independent insurance agent or by contacting the Group Fund Administrator.
ADVANTAGES: Recognized by the State Courts. Approved and regulated by the Alabama Department of Labor. Provides workers' compensation liability coverage at a reasonable price. Choice of joining with a variety of Funds. Attractive rates.
DISADVANTAGES: The Fund determines whether or not to renew your membership. Subject to rate increases. In the event that the Fund becomes insolvent, you can be assessed to make up the monetary shortages (this is known as Joint & Several liability).
COMMENTS: The names, addresses and telephone numbers of most approved group self-insurance funds can be obtained from the Workers' Compensation Division of the Alabama Department of Labor or you can call the Self-Insurance Section at 1-800-528-5166 and request the name of the most appropriate group fund for your class or business.
OPTION (4) - Individual Self-Insurance
DESCRIPTION: You can become a self-insurer. This is a long-term commitment by which a financially strong employer pays benefits to injured employees as mandated by the Alabama Workers' Compensation Law.
CANDIDATES: Any employer who meets the following four financial qualifications: (1) audited financial statements; (2) a $5 million minimum net worth; (3) current assets to current liabilities ratio of 1.0 or greater; and (4) a positive net income. You may conduct a feasibility analysis to determine if it is cost effective for you to self-insure.
SOURCES: Employer's application for self-insurance in PDF. You can also obtain an individual self-insurance packet by writing to the Department of Labor Workers' Compensation Division, 649 Monroe St., Montgomery, Alabama 36131, or speak to an employee in the Self-Insurance Section at 1-800-528-5166, or contact an insurance agent that specializes in the field of self-insurance.
ADVANTAGES: Recognized by the State Courts. Hands-on management of claims, legal issues and safety programs.
DISADVANTAGES: Long-term liability due to lifetime medical benefits mandated by Law.
COMMENTS: Cost considerations include assessments, fees, taxes, excess insurance limits and retention, cost of the claim servicing organization, payments to the injured workers, litigation, consultation, membership in Alabama Workers' Compensation Self Insured Guaranty Association, safety and loss control and exposure to un-funded losses of incurred but not reported claims. Individual self-insurance is regulated by the Alabama Department of Labor.
EMPLOYEE LEASING ARRANGEMENTS
NOTE: DO NOT CONFUSE EMPLOYEE LEASING COMPANIES WITH TEMPORARY HELP AGENCIES.
Employee leasing is not an alternative to workers' compensation but rather an employment alternative.
An employee leasing arrangement is an arrangement whereby an employer contracts with an employee leasing company to provide the services of leased employees. Under a typical arrangement, a participating employer transfers his employees to an employee leasing company and then leases the same employees back from the employee leasing company. The employer or client company in this arrangement pays the employee leasing company for all of his employees' earned wages, fringe benefits, mandated employee benefit programs, and all government withholdings. In return, the leasing company separates all of the payroll withholding items and makes those payments in addition to paying all of the employees' earned wages. The benefit of this kind of arrangement includes cost savings from large group health insurance rates that an employee leasing company can offer participating employers because of the large number of employees. Other administrative services may also be included.
ALTHOUGH THERE ARE MANY LEGITIMATE
EMPLOYEE LEASING COMPANIES, THERE ARE ALSO EMPLOYEE LEASING COMPANIES
THAT MAY NOT BE OPERATING IN FULL COMPLIANCE WITH THE LAW. IF YOU CONTRACT
WITH ONE OPERATING OUTSIDE THE LAW, YOU COULD BE AT THE SAME RISK AS
YOU WOULD BE IF YOU HAD NO COVERAGE. YOU SHOULD SEEK LEGAL ADVICE BEFORE
CONTRACTING WITH A LEASING
THIS IS DISTRIBUTED FOR INFORMATIONAL PURPOSES ONLY. IT IS NOT TO BE CONSTRUED AS, NOR DOES IT HAVE THE EFFECT OF LAW OR REGULATION. ADDITIONAL INFORMATION MAY BE OBTAINED FROM: