Short answer: Yes, for most Iowa employers, starting with the first employee. There is no headcount threshold. The exemptions are specific: household and casual workers paid under $1,500 a year, farms whose non-family cash payroll was under $2,500 last year, and up to four corporate officers who formally reject coverage. Willfully operating uninsured is a class D felony.
The rule in one sentence
Iowa Code §87.1 says every employer subject to the workers' compensation chapters must insure its liability with an authorized carrier, unless the employer is relieved of that duty by qualifying to self-insure. The Iowa Division of Labor's compliance page puts it simply: most employers must either carry a policy or register as self-insured, and self-insurance is approved by the Iowa Insurance Commissioner.
Notice what's missing: a number. Iowa's duty starts with the first employee.
Who falls outside the law
Iowa Code §85.1 lists the exceptions. The ones employers ask about most:
| Worker | Exempt unless... |
|---|---|
| Household or domestic worker (not a household member) | They earned $1,500+ from you in the 12 months before the injury |
| Purely casual worker outside your trade | Same $1,500 / 12-month test |
| Agricultural worker | Your cash payroll to non-exempt workers hit $2,500 in the prior calendar year |
| Farm family members and family farm corporation officers | Generally exempt |
| Workers in farm labor exchanges | Generally exempt |
| Corporate officers (president, VP, secretary, treasurer) | Up to four per corporation may knowingly reject coverage under §87.22 |
Employers can choose to cover exempt workers anyway. A farm that hires a summer crew can cross the $2,500 line quickly, and the test looks back at the previous calendar year.
Owners: opt in, not out
Sole proprietors, partners, limited liability partners and LLC members aren't automatically covered for their own injuries. Under Iowa Code §85.1A, an owner working in the business substantially full time may elect coverage by buying a policy that specifically includes them. DIAL also describes a nonelection filing for owners who decline.
Corporate officers are the reverse. They're covered unless they reject coverage, and the four-officer cap applies to corporations other than family farm corporations.
What happens without coverage
Three consequences stack up:
- Criminal exposure. Iowa Code §87.14A says an employer subject to the chapter can't engage in business without first obtaining insurance, and a willful and knowing violation is a class D felony.
- Civil liability. Under §87.1, an employer that refuses or neglects to insure is liable to injured workers under the common law as modified by statute.
- Lost protection. DIAL explains that an uninsured employer could owe the full amount of damages under tort law instead of the limited compensation workers' comp provides.
DIAL adds that employers may receive criminal or civil penalties.
Independent contractors
Iowa workers' comp doesn't apply to true independent contractors. DIAL is careful, though: a contract label doesn't settle it. If someone works like an employee, they may be one, and the agency decides those questions case by case.
Construction and trucking businesses feel this most. Get certificates of insurance from every sub, and keep them on file before the job starts. A sub's lapse can become your audit charge.
Proving and checking coverage
DIAL's page also covers verification of employer coverage and mandatory injury reporting by employers, insurers and third-party administrators. The Workers' Compensation Division contracts with NCCI to verify whether an employer has coverage.
Iowa examples
A dental office with one hygienist. One employee is enough. A policy is required.
A homeowner paying a nanny $1,800 a year. That's over $1,500, so the nanny is covered by the law.
A family farm paying a neighbor's teen $2,000 last summer. Below $2,500 in the prior year, so the farm is exempt this year, though voluntary coverage is still available.
An S-corp with two officers and no staff. Both officers are covered unless they each reject coverage under §87.22.
Bottom line
Iowa's rule starts at employee number one, the exemptions are narrow and dollar-based, and the criminal penalty is serious. Learn more on our workers' compensation insurance page.
Get in touch with Alishahi Insurance or call (877) 711-4545. See insurance in Iowa.
Frequently asked questions
How many employees before workers' comp is required in Iowa?
Iowa has no minimum. Most employers need coverage from the first employee unless a specific exemption applies.
Do farms need workers' comp in Iowa?
Only if cash payroll to non-exempt workers reached $2,500 in the prior calendar year. Family members are generally exempt.
Can corporate officers opt out of workers' comp in Iowa?
Up to four officers per corporation, other than family farm corporations, may knowingly reject coverage under §87.22.
Do sole proprietors need workers' comp in Iowa?
Not for themselves, but they can elect coverage under §85.1A. Their employees must be covered.
What is the penalty for no workers' comp in Iowa?
Willfully operating without required coverage is a class D felony, and the employer loses the law's liability protection.
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.