Alabama , States

Alabama Workers’ Comp: What Business Owners Must Know

November 17, 2025

Who Needs This Coverage

If your business has five or more employees, you are legally required to carry Alabama workers’ compensation insurance. These rules apply to full-time, part-time, and seasonal employees—including corporate officers and LLC members.

Understanding workers’ comp requirements in Alabama is essential for staying compliant. Even with only five employees on payroll, you’re still responsible under state law.

Exemptions:

Sole proprietors, partners, and LLC members can opt in but are not automatically covered.
Voluntary coverage is often smart, especially for small business owners doing physical work themselves.

Industry Highlights:

Construction: High-risk due to equipment use and fall hazards. Note: Businesses constructing or assisting on-site in the construction of new single-family, detached residential dwellings must carry coverage regardless of employee count.
Agriculture: Often exempt but faces outdoor and machinery dangers.
Healthcare: Must cover lifting injuries and exposure to illness.

These rules are enforced by the Alabama Department of Labor workers’ compensation division under Title 25, Chapter 5. The law protects workers while shielding businesses from lawsuits and major financial loss.

Key Benefits & What's Covered

Alabama workers’ compensation benefits provide fast, no-cost care to injured workers and reduce liability risks for employers.

What’s Included:

Medical coverage: Full treatment paid, with no co-pays or deductibles.
Temporary total disability (TTD): Replaces wages during recovery.
Permanent disability (PPD/PTD): Supports long-term impairments.
Death benefits: Offers support to dependents in fatal cases.

Alabama only requires coverage once you reach five employees—unlike states like Florida or Georgia that trigger coverage at one to three. That said, employers can still apply for self-insurance through the ADOL, if they meet financial guidelines.

Hot Alabama summers make heat-related illness a major concern for roofers, landscapers, and outdoor laborers. With insurance in place, you ensure fast treatment before injuries worsen—helping both your team and your business.

Common Claims and Risks in Alabama

The most common claims include:

Overexertion: From lifting, pushing, or pulling heavy items.
Slips and falls: Especially common on construction or wet worksites.
Contact with machinery: Injuries from tools or equipment.
Exposure to harmful substances: Like mold or industrial chemicals.

In 2023, Alabama businesses reported around 29,400 nonfatal workplace injuries. That’s a clear sign that risks are widespread.

Climate-Based Risks:

Heatstroke and dehydration: Affect outdoor workers every summer.
Limited medical access in rural areas: Can make small injuries worse.

Sample Claim Costs:

Minor cut needing stitches: $1,000–$3,000
Back injury requiring surgery: Over $50,000
Chemical exposure: May require long-term disability payouts

These figures highlight the risk of going without coverage. Just one uncovered injury could lead to massive out-of-pocket expenses or lawsuits. That’s why your risk class matters under NCCI Alabama workers’ comp guidelines.

Want a simple breakdown of how workers’ comp works? Read our guide: Workers’ Comp Insurance Basics – What You Should Know.

Costs, Factors & State-Specific Notes

The workers’ comp insurance cost Alabama businesses pay averages around $119 per month, which is within the expected range for the state. While the national average is approximately $45 per month, costs vary by state and industry risk levels, and Alabama’s average is higher than national due to regional factors.

Cost Factors:

Industry classification: High-risk industries pay more.
Payroll size: Premiums are charged per $100 of payroll.
Claims history: A clean safety record keeps rates low.
Experience modification rate (EMR): Frequent claims increase this number and raise costs.

Your rate is determined by classification codes from the NCCI Alabama workers’ comp system. These codes reflect the risk levels for your type of business.

State Comparisons:

Georgia requires coverage at three employees.
Florida has stricter rules for construction starting at one.

So while Alabama’s five-employee threshold is lenient, you’re still financially exposed until you reach it. Many small employers opt for early coverage to protect themselves.

How to File a Workers' Comp Claim in Alabama

If a worker is injured, knowing how to file a workers’ comp claim in Alabama is crucial for compliance.

What Employees Must Do:

Report the injury to a supervisor orally within 5 days of the accident.
Provide written notice within 90 days of the accident—but reporting immediately is always the best practice.

What Employers Must Do:

Notify your insurance carrier immediately, as most policies require notice within 2–5 days.
Your insurer will then file the official “First Report of Injury” with the state within 15 days of the incident.

If There’s a Dispute:

It goes to the Workers’ Compensation Division, not general civil court.
You have 2 years from the injury (or from the last benefit payment) to formally file a claim.

Recent updates under Alabama workers’ compensation laws 2025—based on revised NCCI Workers Compensation Insurance Plan State Instructions—may affect how claims are processed and how benefits are calculated. Be sure to review current rules before policy renewal.

Bottom Line and Expert Advice

If you’re doing business in Alabama and have—or soon will have—five or more employees, you need to comply with Alabama workers’ compensation insurance laws.

Coverage protects workers, keeps your business legal, and limits your risk. Whether you’re managing a growing crew or operating in a high-risk field, it’s smarter to be covered before a claim happens.

Take These Steps: