Michigan Workers' Compensation Insurance

In 1912, Michigan responded to the rise of industrialization with the adoption of a Workmen’s Compensation Act.

Workmen’s compensation, or workers’ compensation, provides wage replacement, medical care and rehabilitation benefits to individuals injured at work, and protects employers by limiting their liability.

Nearly all Michigan employers are subject to the Workers' Disability Compensation Act, and must carry coverage for their employees.

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Small Business Work Comp Requirements in Michigan

Michigan has a strict workers’ compensation system. Businesses must cover their employees with a work comp insurance policy if any of the following apply:

  • One or more full-time employees.
  • Regularly employing three or more employees at one time (including part-time employees).
  • All public employees.

Exceptions

  • Agricultural employers: These employers must purchase a workers’ compensation policy if they have three or more full-time employees.
  • Independent contractors: According to Michigan state law, a company performing a job for another company is considered an independent contractor. However, if a single person performs work for another company, does not maintain a separate business, and does not offer services to the public, the worker is considered an employee and must be covered by the hiring company’s work comp policy.
  • Sole proprietorship: If employees are the spouse, child or parent of the sole proprietor, they may be excluded.
  • Stock corporation: Corporate officers that own 10% or more stock can be excluded.
  • Partnership: Partners can be excluded.
  • Limited Liability Company: Members that are also managers and own 10% or more of the business can be excluded.

If all employees can be excluded according to one of the above exceptions and no subcontractors are used in the operation of the business, the employer can file an exclusion.

Otherwise, the employer must get coverage, but can talk to their insurer about excluding applicable employees from the policy to reduce their premium.

How to Buy Small Business Workers’ Compensation Insurance

Michigan has a private market. Employers can purchase workers' compensation insurance from any insurance carrier or agency that is licensed to write in that state.

To get workers’ comp coverage:

  1. Add up your payroll by class code, or type of work performed.
  2. Find a licensed commercial insurance agency or carrier. Check that it is licensed to write in all states where you need employees covered.
  3. Contact them to request a quote. Have your payroll information, EIN number and any existing coverage details in front of you.

Most small businesses will start shopping with their local broker or insurance agency. However, many independent agencies can’t or won’t write work comp because it’s often more difficult and less profitable work for them. For straightforward advice and competitive quotes, contact an agency that specializes in work comp.

Michigan also maintains a state fund that competes with the private market. If you’re still having trouble finding coverage, you can contact the Compensation Advisory Organization of Michigan (CAOM).

Coverage and Rates in Michigan

Small business workers’ compensation cost can vary depending on the business. The insurance premium factors in the type of work employees perform, number of employees being covered and past coverage and claims. Learn more about workers’ comp insurance rates >>

Factors That Impact Coverage

  • Who needs to be covered by the policy, where you can buy it and how much it will cost are influenced by state legislation and the state's workers’ compensation system.
  • Your business must comply with the state where your employees perform work, and not necessarily where the business was founded or is based. If your business operates in multiple states, or employees travel across state lines to work, you may need to modify your policy to guarantee coverage.

Michigan Work Comp Resources

Editor’s note: Last updated October 7, 2018

Here's What You Need to Get Started

To buy workers compensation insurance, you need to request a quote from a licensed insurance agent and provide some details about your business.

Here’s what to have in front of you:

  • Number of employees in each class code.
  • Total payroll for all employees. You may be able to exclude yourself if you don't wish to be covered under the policy. 
  • Federal ID Number. If you are a sole proprietor, you can use your Social Security Number.
  • Copy of your workers comp insurance policy, if you've had coverage or claims in the past few years. If you know your company's experience mod, please have your experience mod rating sheet or policy in front of you. Otherwise, you will be assigned a default rating of 1.0.

The information on this page has been interpreted and summarized for your convenience. Please consult your state's governing authority for the most current and complete legislation.