Get a Quote

Workers’ Compensation Insurance in Michigan, Explained for Busy Small Business Owners

Shoreline of Lake Michigan early in the morning at beginning of September, Door County, Wisconsin

Since 1912, when Michigan adopted the Workers' Disability Compensation Act, most employers in the “Mitten State” have been required to carry workers’ compensation insurance

What Is Workers’ Compensation?

Workers’ compensation insurance is designed to provide individuals injured at work or those who become ill on the job with wage replacement, medical care and rehabilitation benefits. Furthermore, the coverage limits the liability of the employer in the event of a workplace accident.

Which Employers Are Required to Carry Workers’ Comp Insurance?

Michigan has some of the most strict workers’ compensation laws in the United States, with nearly all companies required to cover their employees. A business must have coverage if one or more of the following applies:

  • Private employers with one or more full-time employees
  • All private employers regularly employing 3 or more employees at one time (including part-time employees)
  • Agricultural employees that employ 3 or more full-time employees
  • Any household employer that employs one or more full-time workers
  • All public employers

What Are Michigan’s Workers’ Compensation Insurance Rates?

According to one nationwide comparison, Michigan has some of the lowest rates in the country, averaging under $1.50 per $100 in payroll.

The cost of a workers’ compensation policy depends in part on an assigned rate for your business. The Compensation Advisory Organization of Michigan acts as the state’s rating bureau, and determines the advisory rate for each classification code.

Every occupation is assigned a four-digit classification code based on the type of work performed. Insurance companies then establish a base rate for each classification determined by the risk associated with it.

For example, a clothing retail store (class code 8008) might pay $0.78 per $100 in payroll, while a residential carpenter (class code 5645) might pay $1.99 per $100 in payroll. Rates are based on the relative risk of injury and the historical data of filed workers’ compensation claims, and carpentry is generally more dangerous than working in retail.

Here’s a basic example of how a workers’ compensation premium is calculated:

  • Classification code: Clothing retail (8008)
  • Base rate: $0.78
  • Employer payroll: $100,000
  • Workers’ compensation rate: $0.78 per $100 of employer payroll
  • Estimated annual premium: $780

Tip: If a company has employees in more than one classification, these are combined to determine the total premium.

You can learn even more about how rates are calculated in our blog post, Workers’ Compensation Insurance Rates: What They Are & How They’re Set.

How to Buy Workers’ Compensation Coverage in MI

Purchasing workers’ compensation insurance in Michigan can be done in one of three ways:

  • Through a private insurer: The majority of employers obtain coverage through a private insurance company. A list of approved companies can be found on the Department of Insurance and Financial Services website.
  • Individual self-insurance: Employers that can prove financial stability may qualify to be self-insured. Doing so requires permission from the Workers' Compensation Agency (WCA).
  • Group self-insurance: As an alternative to commercial insurance, group self-insurance programs are comprised of a group of employers in the same industry that are willing to combine their premiums to secure the best rate and top-notch coverage. Just the same as individual self-insurance, these groups must be approved by the WCA.

Most small businesses must secure workers’ compensation coverage through a private insurer.

If you need more help or you’re ready to purchase a policy, start your quote today. WorkCompOne provides competitive, no-obligation quotes to small businesses, and can help you navigate your options for coverage.


Tags: buying workers compensation, small business