Workers’ compensation insurance is a type of insurance that businesses purchase to provide benefits for employees who become ill or injured on the job. Every state has unique laws regarding workers’ comp requirements, minimum coverages, and costs, and Illinois business owners should follow the guidelines set forth by the Illinois Workers’ Compensation Commission.
Holding a workers’ comp policy is essential for businesses. Without it, you may face expensive fines, not to mention out-of-pocket expenses for medical treatments. You may also face legal action by employees if you cannot provide the required benefits after a workplace accident.
Who Needs Coverage in Illinois?
One of the most important things you need to know about Illinois workers’ compensation laws is whether or not your business must carry this type of insurance. Most companies are required by law to purchase workers’ comp, and the state reports that an estimated 91 percent of Illinois workers have coverage.
The Illinois Workers’ Compensation Commission states that any business with one employee must have workers’ comp coverage. Even if the worker is part-time, you must have coverage. Companies not in Illinois, but with workers from the state, must also provide coverage.
Fines for not having the required insurance can reach $500 per day with a minimum total fine of $10,000. Another costly risk of not carrying workers’ comp is the potential for lawsuits. If an employee sustains an injury on the job while you did not have coverage, that worker can take you to court, and you could be found liable for medical costs and other expenses.
Illinois Classification Codes and Insurance Costs
The cost of workers’ compensation insurance varies depending on the amount of coverage you choose, your payroll, your company’s history of claims, and the type of work your employees do: the riskier the work, the more costly the insurance.
Illinois relies on the National Council on Compensation Insurance (NCCI) to determine minimum coverage requirements for workers’ comp. The NCCI uses a system of classification codes for different industries. The codes help insurance companies understand risk and price policies accordingly. In states like Illinois that use the NCCI codes, insurance costs are fairly consistent and predictable.
Purchasing Insurance
In Illinois, private companies write and sell workers’ compensation policies. As opposed to states with monopolistic state funds, the private market makes pricing more competitive and usually benefits employers. In rare cases, it may be impossible to secure a private insurer who will write you a policy. If this happens, you can enroll in a residual market known as the market of last resort. Premiums cost about 50 percent more than in the private market.
The Illinois Department of Insurance releases a yearly report on workers’ compensation carriers in the state. The “Market Share Report” lists all available carriers, creating an extensive list that is useful when shopping for a policy.
Illinois business owners also have the option to file for permission to self-insure. Insurance experts typically don’t recommend this for smaller businesses, but some large companies choose to do it. It takes a significant amount of money set aside to provide self-insurance, something most smaller businesses simply cannot do. You must apply to be self-insured and renew that application annually.
Understanding Exemptions
Certain types of workers are exempt under Illinois law and do not have to be covered by a workers’ comp policy. These include sole proprietors, LLC members, corporate officers, and business partners. If you cover employees but do not want coverage for yourself, you must notify the insurance company in writing.
Independent contractors cannot be covered by workers’ comp in Illinois, so make sure you understand this classification. Misclassifying an employee as a contractor and failing to provide workers’ compensation insurance can lead to significant fines.
Companies that hire truckers must also understand an Illinois Supreme Court decision, Roberson v. Industrial Commission. The court decided that even when companies refer to truck drivers as independent contractors, they must provide workers’ comp coverage for them.
Illinois also exempts family members who work in agriculture with less than 400 employed working days per quarter. This is exclusive of the working hours of the employer’s family members, including spouses, children, and any family living member there.
Understanding the Laws to Save
Some employers look at workers’ compensation insurance as an extra financial burden. Some may even try to game the system and get out of paying for this coverage. But in practice, doing so can be even costlier than providing insurance. If you own a business in Illinois, you should get to know the laws, shop around for the best policy, and in the end—you’ll save money while providing excellent care for your employees.
