Workers' comp requirements by state: when your service business must carry coverage

How to read this table

Every state has a workers' compensation law, but they differ on when a small business must buy coverage. This page lists all 50 states with the trigger, the treatment of owners, and a link to the agency that runs the system. We checked the agency pages in October 2026. Where a page did not state a detail plainly, the cell says "Check the agency" and the link goes to the source. Rules change, so confirm with the agency or a licensed insurance agent before you hire. This is general information, not legal or insurance advice.

Three patterns cover most states. About half require coverage from the first employee. A group of states set a higher count: Alabama, Mississippi and Missouri use 5, South Carolina uses 4, and Georgia, Arkansas, North Carolina, New Mexico and Michigan use 3 (Michigan adds a 35-hour test). A few states use other triggers, such as Kansas with its payroll test and Wisconsin with a $500 quarterly wage test. Texas is the one large state where private employers can choose, and South Dakota's labor department says no law requires an employer to carry it.

Workers' comp requirements, state by state

Four states, North Dakota, Ohio, Washington and Wyoming, run state funds where you buy from the state rather than a private carrier. North Dakota and Washington say so on their agency pages. Most other states let you choose among private insurers, and several also have a state-owned insurer or an assigned risk pool for owners that carriers turn down.

Where owners get caught

Thresholds that look alike but count differently. Georgia counts officers and LLC members toward its three even when they waive coverage. North Carolina does not count sole proprietors, partners or LLC members, but does count corporate officers. Michigan has two tests, and a single employee at 35 hours a week for 13 weeks triggers the second. Virginia's agency says the count covers your own staff plus the employees of your subcontractors, whether or not they have their own policy. Read the counting rule in your state, not just the number.

Construction is often stricter. Tennessee and Missouri require coverage from the first employee in construction while the general threshold is 5. Florida uses 1 for construction and 4 for everything else. New Mexico requires coverage for any employer that must be licensed under its construction licensing act. California names five contractor license classes that must carry it even with no employees. If you do roofing, remodeling, concrete or tree work, check the construction rule before the general one.

"Not required" is not "no exposure." Missouri's division warns that exempt employers who go without coverage stay open to civil lawsuits from injured workers, and South Dakota's labor department says the same. Texas nonsubscribers also carry reporting and notice duties set by the state insurance department. A ladder fall or a pressure washer injury can cost more than years of premiums.

Penalties are real. Illinois lists fines of up to $500 per day with a $10,000 minimum for knowing violations. New Jersey lists penalties up to $5,000 for the first ten days and up to $5,000 for each later ten-day period. Nevada lists administrative fines up to $15,000. Montana lists fines up to $5,000 per violation for working without an ICEC or coverage.

What owners should know about covering themselves

In many states a solo owner can skip coverage on themselves but still must cover every hired worker. Illinois, Alaska, Connecticut and North Dakota are examples where owners or officers may stay out of their own policy. Other states pull owners in: Nevada requires licensed-contractor sole proprietors to secure coverage, and Tennessee requires construction owners to cover themselves or register for an exemption. California and Virginia offer different answers for the solo owner who is asked for proof by a general contractor. California uses an exemption certificate for most licensees, and Virginia's Commission says it has no exemption form at all.

Customers and general contractors often ask for a certificate of insurance even where the law does not. Alabama and South Carolina agency pages note that general contractors and property managers commonly ask. Price a policy before bidding subcontract work. Our guide to business insurance for contractors covers how the policies fit together.

If you work in more than one state

Your home-state policy may not follow the crew across a border. Alaska says it has no reciprocity with other states. Connecticut says out-of-state employers must cover their employees working in Connecticut. Wisconsin says an out-of-state business with employees working there needs a policy from an insurer licensed in Wisconsin, endorsed to name Wisconsin. North Dakota can require coverage when 25% or more of an employee's wages or of your payroll relates to work in North Dakota. New Mexico requires out-of-state contractors working there to carry coverage.

Ask your agent whether your policy lists the other states you work in (the "3A" states on a standard policy) and whether a separate state-fund account is needed. Texas, North Dakota, Ohio, Washington and Wyoming have rules that differ from the private-carrier model. Open the agency link for each state and keep a note of the date you checked. The first steps for each state are on our state start pages, including Texas and Ohio.

What to check before you act

1. Open your state's agency link in the table and read the current page. Note the date.
2. Count everyone: part-time, seasonal, family, officers and, in Virginia, subcontractors' employees.
3. Check whether your trade counts as construction, because the threshold may drop to one.
4. Decide how to treat yourself as an owner: covered, exempt, or listed on a registry.
5. Collect a certificate of insurance from every subcontractor before they start. North Carolina's agency page warns that skipping this step can leave you liable for their injured workers.
6. Ask a licensed agent for a quote. A policy bought before the first hire is cheaper than the first uninsured claim.

If you are forming a company at the same time, see LLC vs sole proprietor for contractors, because your entity type changes who counts as an employee in several states. Once a hire is on payroll, a custom CRM can keep job records, crew assignments and subcontractor certificates in one place.

Frequently asked questions