Workers' Compensation Insurance for an LLC
Workers' compensation is insurance tied to having employees, not to being an LLC. Whether it's required, and under what circumstances, is set almost entirely by state law rather than by your business's entity type.
What is workers' compensation insurance?
In general terms, workers' compensation insurance is designed to help address medical expenses and lost wages for an employee who is injured or becomes ill in connection with their job. In exchange, it typically limits an injured employee's ability to sue the employer directly for those same injuries — though the specifics, including what's covered and what's excluded, are set by the applicable state's workers' compensation law and the actual policy.
Is workers' compensation required for LLCs?
Requirements vary significantly by state and often depend on factors like the number of employees, the industry, and whether owners or officers are included or excluded from the count. There is no single nationwide rule. Check your state's official workers' compensation agency for the requirements that apply to your business.
Does having an LLC change workers' compensation requirements?
Generally, no. Requirements are typically driven by whether you have employees, how many, and what industry you're in — not by whether the business is organized as an LLC, corporation, or another entity type.
Are LLC owners covered by workers' compensation?
This depends heavily on the state and on how the owner is classified. Some states allow owners or members to elect in or opt out of coverage for themselves; others treat owner-employees differently than rank-and-file employees. This varies enough by state that a general answer isn't reliable — check your state's rules directly.
How workers' compensation relates to other coverage
Workers' compensation is a distinct coverage from general liability insurance. General liability is generally built around third-party claims — for example, a customer's injury or property damage claim — and typically does not respond to an employee's on-the-job injury the way workers' compensation is designed to. See What Insurance Does an LLC Need? for how the different coverage types relate to one another.
If your LLC has, or is about to have, employees
Read Can an LLC Have Employees? for a broader look at what changes when an LLC hires, and speak with a licensed insurance professional or your state's workers' compensation authority about your specific obligations.