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What Illinois Small Businesses Need to Know About Workers’ Compensation Insurance

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Illinois is one of the most strict U.S. states in its enforcement of workers’ compensation law.

Nearly all Illinois businesses are required to carry workers’ compensation coverage, with very few exceptions.

Illinois has a history of strict workers’ compensation laws, which were put into place following the 1909 Cherry Mine disaster that killed 259 people. Two years after the accident, the state passed a law which serves as the foundation of the Illinois Workers’ Compensation Act that’s in effect today.

Workers' Compensation in Illinois 

But let's back up. Illinois workers' compensation laws are designed to help workers who are injured or become ill because of their job. Workers' compensation insurance is a policy that covers the cost of providing workers' compensation benefits and offers some legal cost coverage to employers.

Workers' compensation insurance is a no-fault system, which means that workers who are injured at work or who develop an illness because of their job do not have to prove that their employer was at fault.
An injury or disease is compensable simply if it arises out of an in the course of the employee’s employment.

In Illinois, the Workers' Compensation Commission (WCC) is responsible for overseeing the workers' compensation system. 

Illinois Workers’ Compensation Requirements & Exceptions

Illinois requires all employers with one or more employee to provide worker’s compensation insurance, with the exception of the following parties that can exempt themselves:

  • Sole proprietors
  • Business partners
  • Corporate officers
  • Members of Limited Liability Companies (LLC)

While the above individuals are not required to be covered, they may opt in to ensure they’re eligible for benefits in the event of a workplace injury or illness.

Other exceptions include:

  • Independent contractors: Employees include full-time, part-time and family members. Further, the state determines whether a worker is an employee or contractor, not the employer. For example, the Illinois Supreme Court found that referring to a truck driver as an independent contractor doesn’t remove the employer’s obligation to provide workers’ compensation insurance.
  • Hazardous industries: Anyone working in a hazardous industry – such as construction or trucking – must have coverage. This holds true even if they’re a sole proprietor, business partner, corporate officer or member of a limited liability company.

With an estimated 91% of employees covered by the Illinois Workers’ Compensation Act, it’s likely that your company is required to maintain an active policy.

An employer that knowingly and willfully neglects to obtain insurance can be fined up to $500 for every day of non-compliance. Also, depending on the circumstances, corporate officers can be held personally liable if the company doesn’t or is unable to pay the fine.

Rather than take a risk, it’s critical to do the following:

  • Purchase workers’ compensation insurance for your full employee payroll.
  • Post a notice of coverage in your workplace.
  • Keep records of all work-related injuries and illnesses, and report any incident that involves more than three lost workdays to the Illinois Workers' Compensation Commission.

Illinois Work Comp Benefits 

Prior to the passage of workers’ compensation laws, workers could receive compensation for pain and suffering, loss of enjoyment of life and other damages that a jury or judge can award. Now, the IWCA limits an employee’s recovery to the following areas, no matter how serious the injury:

  • Medical treatment
  • Wage loss benefits
  • Disability benefits
  • Vocational rehabilitation
  • Death and burial benefits for survivors

The IWCA also establishes an administrative system for resolving disputes over whether a condition is compensable and over the nature and extent of any disability resulting from a work-related injury or disease.

If an employee is injured at work, they must go through workers' compensation instead of the courts.

Employers must pay all medical expenses for treatment that is reasonable and necessary to treat an employee’s work-related injury or disease. In addition, employees who miss work time due to a work-related condition may receive weekly benefits equal to two thirds of the average weekly wage (AWW) that they earned prior to an injury.

Employees who sustain permanent impairments may receive additional weekly benefits or obtain vocational rehabilitation. All workers' compensation benefits are exempt from income taxes.

Buying Workers’ Compensation Insurance in Illinois

Within Illinois’ private market for workers’ compensation insurance, employers have two options for securing coverage:

  • Purchase directly from an insurance company or broker, which compete on rates, convenience and customer service.
  • Obtain permission from the Illinois Workers' Compensation Commission to self-insure. Self-funded insurance options are limited to larger employers.

Despite recent reforms to reduce the cost of carrying workers’ compensation insurance, Illinois still has one of the highest rates in the country.

In 2020, Illinois’ premium rate index was $1.46 per $100 of payroll, making it the 24th highest in the nation.

According to a study conducted by the Massachusetts-based Workers Compensation Research Institute (WCRI), costs are largely driven by “substantial attorney involvement in cases and medical-legal bills.”

If you have questions about Illinois workers’ compensation insurance or are in the market for a policy, read our Small Business Owner's Guide to Workers' Compensation Insurance.


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Tags: workers compensation, workers compensation insurance, illinois