Illinois Business & Contractor Insurance — Important Information

Important insurance requirements, Workers’ Compensation rules, General Liability information, audits, loss history, contractor rating factors, and surety bond requirements for Illinois businesses.

Workers’ Compensation Insurance Is Mandatory for Most Illinois Employers

Illinois has one of the broader Workers’ Compensation requirements in the country.

If an Illinois business has one employee — even one part-time employee — Workers’ Compensation insurance is generally required.

This requirement can apply even when:

The employee works part time
The employee is a family member
The company is headquartered outside Illinois
The employee lives outside Illinois but performs work in Illinois

The Illinois Department of Insurance emphasizes that virtually all Illinois employers must secure their Workers’ Compensation liability.

Contractors, Construction Companies and Other High-Risk Businesses

Business owners sometimes believe they do not need Workers’ Compensation because they are a sole proprietor, LLC member, partner, or corporate officer.

Illinois allows certain owners and officers to elect whether they personally participate in Workers’ Compensation coverage.

However, Illinois has special rules for businesses engaged in extra-hazardous occupations, including construction, trucking, and businesses operating at construction sites.

Do not assume that forming an LLC automatically exempts the business from Workers’ Compensation requirements.

Out-of-State Contractors Working in Illinois

Having Workers’ Compensation insurance in another state does not automatically satisfy Illinois requirements.

Illinois Workers’ Compensation law can apply when:

An employee is injured while working in Illinois
The employee’s work is principally located in Illinois
The employment contract was made in Illinois

If an out-of-state contractor sends employees into Illinois, the Workers’ Compensation policy must properly provide Illinois coverage.

Penalties for Not Carrying Workers’ Compensation Insurance

Operating without required Workers’ Compensation insurance can be extremely serious.

An Illinois employer that knowingly and willfully fails to maintain required coverage may face a penalty of:

Up to $500 per day

with a:

Minimum penalty of $10,000

Corporate officers may also potentially be personally responsible for unpaid penalties.

An uninsured employer may also lose important protections provided by the Workers’ Compensation Act. An injured employee may be able to pursue the employer in civil court, where damages are not subject to the normal Workers’ Compensation benefit structure.

General Liability Does NOT Replace Workers’ Compensation

This is one of the most important things for contractors to understand.

General Liability

Generally protects the business against certain claims involving third parties, such as:

Bodily injury
Property damage
Completed operations
Products liability
Certain personal and advertising injury claims

Workers’ Compensation

Provides benefits related to qualifying employee work injuries and occupational illnesses.

A General Liability policy does not satisfy Illinois Workers’ Compensation requirements.

Health insurance, disability insurance, occupational accident insurance, or another liability policy also does not automatically substitute for statutory Workers’ Compensation coverage.