Buying Your First Workers Comp Insurance Policy In Michigan: A Complete Guide

Buying Your First Workers Comp Insurance Policy In Michigan: A Complete Guide

If you’re a Michigan business owner hiring employees for the first time, purchasing workers’ compensation insurance is one of the most important steps in protecting your company. It’s not just a smart business move — it’s often required by law.

In this guide, we’ll break down what workers’ comp covers, who needs it in Michigan, how to get coverage, and key things to watch out for when buying your first policy.

What Does Workers’ Compensation Insurance Cover?

Workers’ compensation insurance protects both your employees and your business.

It covers:

• Medical expenses for job-related injuries or illnesses.
• Lost wages while employees recover.
• Rehabilitation services if an employee needs physical therapy or retraining.
• Employers liability coverage that protects your business if you’re sued over a workplace injury.

Without this coverage, a single workplace injury could become financially devastating — especially for a small business just getting started.

Who Needs Workers’ Compensation Insurance in Michigan?

In Michigan, you must carry workers’ compensation insurance if:

• You have three or more employees, or
• You have at least one full-time employee.

Failing to carry coverage when required can lead to state fines, legal action, or even business closure. Even if you’re below these thresholds, voluntarily carrying a policy can protect your business from unexpected costs.

How to Get Workers’ Comp Coverage

When purchasing your first policy, insurance companies will ask for key business details to determine your premium:

• Industry and operations – What kind of work do your employees perform?
• Payroll estimates – Premiums are based largely on your total payroll.
• Risk classification – Each industry is assigned a classification code based on risk. Construction, manufacturing, and similar fields typically pay more than office-based businesses.

If your business is new or considered higher risk, you may need to get coverage through Michigan’s Workers’ Compensation Placement Facility, a state-sponsored program that ensures coverage access for businesses unable to secure it through private insurers.

Working with an independent insurance agent can help you compare quotes, understand your options, and make sure your business stays compliant.

Choosing the Right Coverage Limits

Michigan’s minimum required limits for workers’ comp are:

• $100,000 per injury; $500,000 per policy; $100,000 per employee

However, it’s highly recommended to have limits of $1 million / $1 million / $1 million. The additional cost is minimal, and the higher protection can make a huge difference if a serious injury occurs.

Remember — medical and legal costs can rise quickly, and exceeding your limits could expose your business to major financial risk.

Key Things to Keep in Mind

• Your policy will be audited. Premiums are based on payroll, so insurance companies perform an annual audit. If you underreport payroll, you could owe a large adjustment at year-end.
• Coverage gaps can be costly. Failing to maintain required workers’ comp coverage can lead to penalties and lawsuits.
• Industry risk matters. A high-risk classification can increase premiums, so make sure your classifications are accurate.
• Independent agents can help. They’ll shop the market, explain your options, and ensure you meet all state requirements.

Final Thoughts

Buying your first workers’ comp policy in Michigan doesn’t have to be complicated. By understanding the state requirements, how premiums are calculated, and why higher coverage limits are worth it, you’ll be well prepared to protect your employees — and your business.

If you’re unsure where to start, talk with an independent insurance agent who can guide you through the process, compare options, and help you stay compliant with Michigan law.