Michigan Workers Comp Insurance for Small Businesses: What You Need To Know

Michigan Workers Comp Insurance for Small Businesses: What You Need To Know

Workers compensation insurance is one of the most important coverages for small business owners in Michigan. It provides protection if an employee gets injured or becomes sick because of their job, covering medical expenses, lost wages, and rehab services so they can recover and return to work safely.

In Michigan, workers comp insurance is required by law if your business has three or more employees at any time during a calendar year — including full-time, part-time, and seasonal workers.

If you have even one full-time employee working at least 35 hours a week for 13 weeks or more, you’re also required to carry workers comp coverage. It’s not optional, and the penalties for non-compliance can be severe.

What Workers Comp Covers

Workers comp insurance covers:

• Medical expenses related to workplace injuries or illnesses
• Lost wages while the employee is recovering
• Rehabilitation services if needed for recovery or return-to-work programs
• Death benefits if an employee passes away due to a work-related injury

It also includes employers liability coverage, which protects your business from lawsuits filed by employees who are injured on the job.

Minimum Limits vs. Recommended Limits

Michigan’s minimum requirements are:

• $100,000 per employee; $500,000 policy limit; $100,000 per accident

While these meet the legal standard, they may not be enough if a serious injury occurs. It’s often better to carry $1 million limits across the board. The cost difference is usually small, but the added protection can make a huge difference when a major claim happens.

How Workers Comp Costs Are Determined

The cost of workers compensation insurance depends on a few key factors:

• Payroll – Higher payroll typically means higher premiums
• Class codes – Each job type has a code tied to its risk level
• Claims history – Businesses with frequent or severe claims pay more
• Experience modification factor (“mod”) – Adjusts your premium based on your past performance compared to others in your industry

Many insurance carriers also offer discounts for companies with strong safety programs or OSHA compliance.

Why Employee Classification Matters

Accurate employee classification is critical. Each worker’s job duties should match the correct class code on your policy, and payroll should be reported accurately.

At the end of each policy term, your insurance company performs a workers comp audit to ensure your payroll and operations were reported correctly. Incorrect information can result in premium adjustments or penalties.

Choosing the Right Carrier

Not every insurance company is the right fit for every business. Some specialize in certain industries or job types — for example, contractors, manufacturers, or service-based businesses.

If you have trouble finding coverage in the standard market, you can still get protection through Michigan’s state workers compensation placement facility, which ensures every employer has access to compliant coverage.

Working With an Experienced Agent

One of the best ways to navigate workers comp insurance is to work with an experienced insurance agent who understands your industry. An agent can help:

• Make sure your policy is set up correctly
• Match you with the right carrier for your business type
• Guide you through the audit and claims process

Workers comp might seem complicated, but having the right partner simplifies everything and ensures your business stays protected and compliant.