Workers' compensation insurance in North Carolina

What is workers' compensation insurance?

Workers' compensation insurance pays for medical expenses and lost wages when an employee is injured on the job. In NC, it is required by law for most businesses with 3 or more employees, full-time or part-time.

NC workers' comp law

North Carolina General Statute Chapter 97 (the Workers' Compensation Act) requires employers with 3 or more employees to carry workers' compensation insurance. The requirement applies to:

• Sole proprietors with employees
• LLCs, corporations, and partnerships
• Full-time and part-time employees both count toward the threshold

Exemptions: agricultural employers with fewer than 10 employees, domestic service employees, certain railroad workers, and some federal employees are exempt. Sole proprietors and partners without employees are generally exempt.

Construction industry:the 3-employee threshold applies, but enforcement is stricter. Many contracts (including government contracts) require workers' comp regardless of employee count.

What workers' comp covers

• Medical expenses for work-related injuries and illnesses
• Lost wages (typically 2/3 of average weekly wage)
• Rehabilitation costs
• Death benefits if an employee is killed on the job

What it does NOT cover: injuries to the owner if they have excluded themselves, injuries caused by employee intoxication, self-inflicted injuries, and injuries during off-duty activities unrelated to work.

How rates are calculated

Workers' comp premiums are based on three factors:

• Your payroll (higher payroll = higher premium)
• Your industry NCCI class code (construction and manufacturing have higher base rates than office-based businesses)
• Your experience modification factor (EMR), your claims history relative to industry average

NC workers' comp rates are set by the NC Rate Bureau and approved by the Insurance Commissioner. Individual carriers can deviate from bureau rates and may offer credits for safety programs and accurate payroll practices.

The annual audit

Workers' comp policies are audited at the end of each policy period. Your premium is adjusted based on actual payroll versus estimated payroll. A business that underestimates payroll, by hiring more employees or running higher wages than projected, can face a significant additional bill at audit. Keep your payroll estimate current throughout the year.

Cooper's take

Frequently asked questions