How Does Workers’ Compensation Work In Michigan?

Michigan is an up-and-coming area for business owners, with many opportunities in thriving cities and small towns with tourist appeal. But before setting up your business in Detroit or the Upper Peninsula, it’s critical to make sure you are covered for all liabilities.

Like most states, Michigan requires workers’ compensation insurance to cover employee workplace injuries and illnesses. Knowing the state’s requirements for this insurance is the first step to purchasing the coverage you need.

What Is Workers’ Compensation?

Workers’ compensation is a type of liability insurance that provides employees with financial compensation if they get injured on the job or develop an occupational disease or illness. With the exception of Texas, every state in the U.S. requires most businesses to carry workers’ comp insurance.

Workers’ compensation plans typically cover the medical costs directly related to employment. This also offers a benefit to the employer—a worker who accepts workers’ compensation benefits generally waives their right to sue, and the employer is not liable for medical costs or other damages except in rare cases, such as gross negligence.

Who Needs Coverage?

In Michigan, any business that employs one or more people for more than 35 hours a week or employs more than three people at one time must carry workers’ comp.

Michigan workers’ compensation laws cover employees that are often left uncovered in other states, including part-time employees in a business with three or more employees.

Agricultural business owners must cover employees if they have three or more employees working 35 hours a week for 13 or more consecutive weeks. Domestic servants are covered if they work the same requirements, and all public employees are covered.

These regulations benefit both the employer and employee in the event of an accident, providing broader coverage and minimizing liability.

Where Can Michigan Employers Purchase Coverage?

Employers have three primary sources for workers’ compensation coverage, but they don’t have one option that many in other states do. Michigan is one of the states that does not offer a state fund for insurance, which means most businesses purchase coverage from a private insurer.

• From a Private Insurer

  Most private firms that offer coverage for your business offer workers’ compensation plans as part of broader coverage. This is the easiest way to get coverage for your employees, but your options vary based on what type of business you run. Businesses in more “dangerous” industries that face many expensive liabilities, such as employees who work with heavy machinery or restaurants and bars that sell alcohol, have a higher risk level. Private insurers may charge higher rates or even decline to insure these businesses.

• The Assigned Risk Pool (Insurer of Last Resort)

  Even in states that don’t have a state fund for coverage like Michigan, there is an option for businesses that can’t find coverage elsewhere. The Michigan Workers’ Compensation Placement Facility has a website that allows anyone who hasn’t obtained independent coverage to apply through the state. The state has a stake in ensuring every business has proper coverage, so they don’t wind up on the hook for employee medical bills after the business declares bankruptcy.

• Applying for Self-Insurance

  Michigan allows businesses that display the ability to cover their own liabilities to apply for self-insurance. The advantage of this is the business doesn’t have to pay regular payments if they can guarantee the safety of the business and its employees. However, there is state oversight to ensure the business has the financial stability they claim. All forms needed to apply for self-insurance and find other self-insured businesses are available on the website.

Coverage Compliance

Michigan’s workers’ compensation laws can be complex, but they offer more comprehensive coverage for both employees and employers than in many neighboring states. Before setting up shop, find the coverage that works best for your business to help weather any unexpected storms. No business can avoid 100 percent of onsite accidents, but comprehensive coverage can ensure your business and your employees rebound in the best way possible.