In almost every U.S. state, employers are required to carry workers’ compensation insurance if they have a certain number of employees. If you’re a business owner in Kentucky, you must carry workers’ comp insurance if you have at least one employee. Like most states, Kentucky specifies a few employee types that are exempt from compulsory coverage.

Workers’ compensation is one of many small business insurance types all Kentucky entrepreneurs should consider.

In this article, we’ll go over who you need to cover, who is exempt, and possible penalties for non-compliance.


How does workers’ compensation insurance in Kentucky work?


The state of Kentucky requires you to carry workers’ compensation insurance as soon as you have one employee. Employers can obtain coverage by purchasing a policy via the private market. If they can’t find suitable coverage from a private insurer, they can apply for coverage via the Kentucky Employers’ Mutual Insurance Authority.

Employers in Kentucky can also qualify to become a self-insurer provided they meet all of the following requirements:

  • Have $10 million more in assets than their total liabilities
  • Have completed and filed the Self-Insurance Package application form SI-02 two months prior to the planned self-insurance date
  • Submit complete workers compensation loss data for the prior 5 years
  • Provide a security deposit of at least $500,000
  • Submit a Guarantee Agreement
  • Submit a board of directors resolution agreeing to become a self-insurer
  • Have a minimum coverage limit of $10 million per occurrence


Who needs workers’ compensation insurance in Kentucky?


Nearly every employee in Kentucky must be covered by workers’ compensation insurance, with some exceptions. Employees who are exempt from mandatory coverage include:

  • Agricultural workers
  • Employees who oppose insurance coverage on the basis of religion
  • Domestic workers employed in a household with two or fewer employees
  • Handypersons employed for less than 20 days per year
  • Individuals performing work in exchange for aid or sustenance from a religious or charitable organization

In addition to the above exemptions, any employee in the state of Kentucky can waive their right to workers’ compensation coverage. This can be done by completing and filing a Form 4 Waiver with the Department of Workers’ Claims.

As a business owner or sole proprietor, you don’t have to purchase workers’ compensation insurance for yourself. That doesn’t mean you shouldn’t get coverage. Sustaining an injury or illness while performing your work can lead to sizable hospital bills, medical costs and a lengthy recovery period. Investing in workers’ comp for yourself could save you from a brutal financial setback.


What are the penalties for not having workers’ comp in Kentucky?


Not providing workers’ compensation coverage in Kentucky when you’re required to do so lead to some serious consequences. If you’re failed to purchase coverage or are found to have a lapse of coverage, you could be fined $1,000 per employee. You could also face mandatory closure, additional fines, jail time, or other criminal penalties.

On top of that, if one of your employees were to have a workplace accident requiring medical attention during the period of time your business was uninsured, you could be liable for their entire medical expenses and lost wages.


What does workers’ comp cover?

Medical costs

If one of your employees is injured or becomes ill on the job, workers’ comp can cover their immediate medical expenses such as ambulance rides, emergency room visits, x-rays, surgery and prescription medications.

For example, if a kitchen employee reaches into a sink and slices their hand on a broken glass, they might require medical attention. Workers’ comp could cover the costs of their emergency room visit, stitches and pain management prescriptions.

Lost Wages

Many work-related incidents can leave employees unable to work for several weeks or months. Workers’ comp can provide some relief for employees in the form of partial wage replacement.

If an employee breaks their foot in a work-related accident, they could end up stuck at home for multiple months. While they’re out of work, workers’ comp would cover some of their lost wages.

Ongoing Care

Some work-related injuries require long-term care such as physical therapy or pain management. Often, these injuries are more the result of repetitive workplace stress rather than a single traumatic incident. Chronic back issues for construction workers and carpal tunnel syndrome for office employees are two common examples of the types of workers who might receive ongoing care due to repetitive stress. If their claim is approved, workers’ comp can cover the costs associated with their ongoing care.

Death Benefits

If the unthinkable happens and an employee passes away because of a workplace incident, workers’ comp can cover funeral costs and other death benefits for the deceased worker’s family or beneficiaries.