Short answer: Yes. Illinois requires nearly every employer with even one employee, including part-time workers and family members on payroll, to carry workers' compensation insurance, according to the Illinois Workers' Compensation Commission. Exceptions are rare. You can buy a policy from a private insurer or, with approval, self-insure. Employers caught without coverage face fines and stop-work orders.
One employee is enough
Many states give small businesses a threshold of three, four or five employees before coverage is required. Illinois doesn't. The Illinois Workers' Compensation Commission (IWCC) says almost every employer must have workers' compensation insurance, even with just one part-time employee or a family member on payroll.
That makes Illinois one of the stricter states for very small businesses: the coffee shop with a single weekend barista and the contractor with one helper both need a policy.
The narrow exceptions
The Illinois Workers' Compensation Act exempts very few workers. Before you assume you're exempt, consider:
- Sole proprietors, partners and LLC members aren't automatically covered for themselves, but anyone they employ must be. Owners can usually elect to include themselves.
- Genuine independent contractors aren't employees, but Illinois looks at the actual working relationship, such as who controls the work and whether the job is part of your regular business. A 1099 form doesn't settle the question.
- Certain agricultural and domestic workers may be outside the Act in limited situations, depending on hours and payroll.
If you're unsure, ask the IWCC or a licensed agent before an injury happens, not after.
How Illinois enforces it
The IWCC has an insurance compliance unit that investigates employers without coverage. Possible consequences under the Act include:
- Daily fines for each day without coverage.
- Stop-work orders that shut down operations until you obtain a policy.
- Personal liability for corporate officers who knowingly fail to provide coverage.
- Direct lawsuits from injured workers, without the protection workers' comp normally gives employers.
The cost of a single uncovered injury can easily exceed years of premium.
Where to buy coverage
Illinois has a competitive private market for workers' compensation. If no insurer will write your business voluntarily, you can apply to the Illinois assigned risk plan, administered by the National Council on Compensation Insurance (NCCI). Larger, financially strong employers can apply to self-insure.
Workers' comp is often bundled with other small-business coverage. See our business owners policy (BOP) guide for how the pieces fit.
What the policy covers
A standard policy has two parts. Part One pays the benefits required by the Illinois Act: medical treatment, temporary and permanent disability payments and death benefits. Part Two, employer's liability, responds to certain lawsuits tied to workplace injuries. Learn more on our workers' compensation insurance page.
What drives the price
Premiums are mostly based on payroll, the classification code for each type of work, and your experience modification factor once you're large enough to have one. Expect an audit after each policy term that compares estimated payroll with actual payroll. Classification errors are one of the most common reasons small businesses overpay or face surprise audit bills.
Workplace notices and reporting
Illinois employers must post a notice telling workers about their rights and how to report an injury. Qualifying injuries must also be reported to the IWCC, and insurers handle most of the paperwork when you report promptly.
Common scenarios
You hire your teenage nephew to work weekends. He's an employee. You need coverage.
You pay a handyman on a 1099. If you control his schedule and methods and his work is part of your regular business, Illinois may treat him as an employee.
You open a second location in Indiana. Your Illinois policy may need other-states coverage.
Key terms
- IWCC: the agency that administers Illinois workers' compensation.
- Assigned risk plan: coverage of last resort for employers turned down in the voluntary market.
- Stop-work order: an order halting business operations until coverage is in place.
- Experience modification factor: a multiplier that adjusts your premium based on past claims.
Questions to ask your broker
- Are my employees in the right classification codes?
- Should owners or LLC members be included?
- Do any workers travel or work remotely in other states?
- What records will the premium audit require?
Bottom line
In Illinois, if you have an employee, plan on carrying workers' compensation. Exemptions are narrow, and enforcement includes fines, stop-work orders and personal liability.
Contact Alishahi Insurance or call (877) 711-4545. See insurance in Illinois.
Frequently asked questions
Is workers' comp required in Illinois?
Yes. Nearly every employer with even one employee, including part-time workers and family members, must carry it.
Do sole proprietors need workers' comp in Illinois?
Not for themselves, but they must cover any employees. Owners can usually elect coverage for themselves.
What happens if an Illinois employer has no workers' comp?
Possible daily fines, stop-work orders, personal liability for officers and direct lawsuits from injured workers.
Where can I get workers' comp if insurers turn me down?
The Illinois assigned risk plan, administered by NCCI.
How are workers' comp premiums calculated?
Mainly by payroll, classification codes and your experience modification factor.
Alishahi Insurance · 439 N Canon Dr, Penthouse, Beverly Hills, CA 90210 · (877) 711-4545 · CA License #4348151. General information only. This isn't legal, tax or financial advice or a coverage determination. Coverage depends on policy language and underwriting, and rules vary by state.