Quick answer
Every state except Texas requires most employers to carry workers' compensation, but the starting point differs: many states require it from the first employee, others from 3, 4 or 5 employees, and construction often has a lower threshold. North Dakota, Ohio, Washington and Wyoming require you to buy it from the state fund.
Workers' comp thresholds by state (2026)
| State | Required when you have | Where to buy | Notes |
|---|---|---|---|
| Alabama | 5+ employees | Private insurer or state fund | |
| Alaska | 1+ employees | Private insurer or state fund | |
| Arizona | Any employee | Private insurer or state fund | |
| Arkansas | 3+ employees | Private insurer or state fund | |
| California | Any employee | Private insurer or state fund | Roofing and tree-service contractors need coverage even with no employees. |
| Colorado | 1+ employees | Private insurer or state fund | |
| Connecticut | 1+ employees | Private insurer or state fund | |
| Delaware | 1+ employees | Private insurer or state fund | |
| District of Columbia | 1+ employees | Private insurer or state fund | |
| Florida | 4+ employees (1+ in construction) | Private insurer or state fund | |
| Georgia | 3+ employees | Private insurer or state fund | |
| Hawaii | 1+ employees | Private insurer or state fund | |
| Idaho | 1+ employees | Private insurer or state fund | |
| Illinois | 1+ employees | Private insurer or state fund | |
| Indiana | 1+ employees | Private insurer or state fund | |
| Iowa | 1+ employees | Private insurer or state fund | |
| Kansas | 1+ employees | Private insurer or state fund | Employers with annual gross payroll of $20,000 or less are generally exempt. |
| Kentucky | 1+ employees | Private insurer or state fund | |
| Louisiana | Any employee | Private insurer or state fund | |
| Maine | 1+ employees | Private insurer or state fund | |
| Maryland | 1+ employees | Private insurer or state fund | |
| Massachusetts | Any employee | Private insurer or state fund | |
| Michigan | 3+ employees | Private insurer or state fund | Also required with 1 employee working 35+ hours a week. |
| Minnesota | 1+ employees | Private insurer or state fund | |
| Mississippi | 5+ employees | Private insurer or state fund | |
| Missouri | 5+ employees (1+ in construction) | Private insurer or state fund | |
| Montana | Any employee | Private insurer or state fund | |
| Nebraska | 1+ employees | Private insurer or state fund | |
| Nevada | 1+ employees | Private insurer or state fund | |
| New Hampshire | Any employee | Private insurer or state fund | |
| New Jersey | 1+ employees | Private insurer or state fund | |
| New Mexico | 3+ employees (1+ in construction) | Private insurer or state fund | |
| New York | Any employee | Private insurer or state fund | Employers must also carry disability benefits (DBL) and paid family leave coverage. |
| North Carolina | 3+ employees | Private insurer or state fund | |
| North Dakota | Any employee | State fund only | |
| Ohio | Any employee | State fund only | |
| Oklahoma | Any employee | Private insurer or state fund | |
| Oregon | Any employee | Private insurer or state fund | |
| Pennsylvania | Any employee | Private insurer or state fund | |
| Rhode Island | 1+ employees | Private insurer or state fund | |
| South Carolina | 4+ employees | Private insurer or state fund | |
| South Dakota | Optional | Private insurer or state fund | |
| Tennessee | 5+ employees (1+ in construction) | Private insurer or state fund | |
| Texas | Optional | Private insurer or state fund | Employers who opt out ("non-subscribers") must notify the Texas Department of Insurance and their employees. |
| Utah | Any employee | Private insurer or state fund | |
| Vermont | 1+ employees | Private insurer or state fund | |
| Virginia | 3+ employees | Private insurer or state fund | |
| Washington | Any employee | State fund only | |
| West Virginia | 1+ employees | Private insurer or state fund | |
| Wisconsin | 3+ employees | Private insurer or state fund | |
| Wyoming | Any employee | State fund only |
Sources: MoneyGeek (updated Sep 2026), cross-checked with NerdWallet (Apr 2026). These are baseline rules: exemptions for owners, officers, farm, domestic and casual workers vary. Always confirm with your state's workers' compensation agency. "Private insurer or state fund" means a state fund may also exist in addition to private insurers.
What workers' comp covers
Workers' compensation pays medical bills and part of lost wages when an employee is hurt or gets sick because of their job. Most policies also include employer's liability coverage, which helps if an employee sues you over a workplace injury. Read the full workers' compensation guide or estimate your premium with the cost calculator.
Frequently asked questions
Which states don't require workers' compensation?
Texas is the only state where most private employers can legally choose not to carry workers' comp (they are called non-subscribers and must notify the state and their employees). Some sources also list South Dakota as optional. Every other state requires coverage once you reach its employee threshold.
How many employees before workers' comp is required?
It depends on the state. Many states, including New York, California and Pennsylvania, require coverage from the first employee. Others start at three (Georgia, North Carolina, Virginia), four (Florida, South Carolina) or five employees (Alabama, Mississippi, Missouri, Tennessee). Construction businesses often have lower thresholds.
What is a monopolistic workers' comp state?
In North Dakota, Ohio, Washington and Wyoming, employers must buy workers' compensation from the state-run fund instead of a private insurer. Private policies there usually exclude workers' comp, so businesses may also need stop-gap employer's liability coverage.
Do sole proprietors need workers' comp?
Usually not for themselves. Most states don't require sole proprietors or partners with no employees to cover themselves, though some construction rules differ. Many clients and general contractors still require it, so some owners buy a policy or get a state exemption certificate.
How much does workers' comp cost?
According to Insureon's 2026 data, the median small business pays $54 a month. Costs depend heavily on industry and payroll: the construction median is $254 a month, while consulting businesses pay about $40.