If you're running a business in North Carolina, workers' compensation insurance probably isn't the most exciting item on your to-do list. But here's the thing: it's one of those safety nets you absolutely need before something goes wrong. Whether you're hiring your third employee or managing a team of 30, understanding North Carolina's workers' comp requirements can save you from serious financial headaches down the road.
The good news? North Carolina offers some of the most affordable workers' compensation rates in the country. And the system is designed to be straightforward—if you know what you're dealing with. This guide walks you through everything you need to know: who needs coverage, who's exempt, what it costs, and how the claims process actually works.
Who Needs Workers' Compensation Insurance in North Carolina?
North Carolina's threshold is simple: if you employ three or more people, you need workers' compensation insurance. This applies across the board—whether you're a sole proprietorship, LLC, partnership, or corporation. Part-time, full-time, and seasonal employees all count toward that three-employee minimum.
There's one exception that overrides the three-employee rule: if your business involves work with radiation, you must carry workers' comp coverage from day one, even if you only have a single employee. The state takes radiation exposure seriously, and the law reflects that.
Now, here's where it gets a bit tricky: sole proprietors, LLC members, and partners don't automatically count as employees under North Carolina law. They're excluded by default, though they can choose to opt in for coverage. However, corporate officers—think S-corps and C-corps—are considered employees and do count toward that three-person threshold.
Common Exemptions and Special Cases
Not every worker needs to be covered. North Carolina carves out several exemptions that can significantly affect whether you need a policy. If you employ domestic workers directly in a household setting, they're exempt. Same goes for casual employees—those whose work is both casual and outside the regular course of your business operations.
Farm operations get special treatment too. If you run a farm with fewer than 10 full-time, non-seasonal workers, you're exempt from the coverage requirement. Federal government employees working in North Carolina and certain railroad workers covered under federal law also fall outside the state system.
But here's a critical warning about independent contractors: calling someone an independent contractor and issuing them a 1099 doesn't automatically exempt you from liability. The North Carolina Industrial Commission looks at the actual nature of the working relationship—things like who controls the work, who provides equipment, and how permanent the arrangement is. If they determine your "contractor" is actually an employee, you could be on the hook for their injuries even without insurance. Even worse, if you hire a subcontractor who doesn't carry their own workers' comp, you might be liable for injuries to their workers too.
What Does Workers' Comp Insurance Cost?
The good news: North Carolina consistently ranks among the most affordable states for workers' compensation coverage. Rates here are competitive with states like Virginia, Maryland, and Utah, and generally lower than the national average.
Your premium depends on several factors. The basic formula is straightforward: take your annual employee payroll, divide it by 100, and multiply it by your industry's rate. So if you have $200,000 in annual payroll and your industry rate is $1.50 per $100 of payroll, your base premium would be around $3,000.
But that's just the starting point. Your actual rate varies based on what your employees do. Office workers in low-risk environments have significantly lower rates than, say, construction workers or roofers. Your claims history matters too—if you've had multiple workplace injuries, expect to pay more. Insurance companies can adjust their rates up or down by as much as 25% based on your specific risk profile and safety record.
The North Carolina Rate Bureau sets base rates, and individual insurance carriers build on those foundations. Shopping around can save you money, as different insurers offer different credits and approaches to underwriting.
How the Claims Process Works
If an employee gets injured on the job, time is critical. They need to notify you as soon as possible—and they must provide written notice within 30 days of the injury. This isn't just a formality. Missing that 30-day window can jeopardize their claim entirely.
Once notified, you report the injury to your insurance carrier, who then handles the claim. If your insurer accepts the claim, benefits kick in fairly quickly. Workers' comp covers all medical expenses related to the injury—doctor visits, surgery, hospital stays, prescriptions, physical therapy, you name it. The injured worker shouldn't receive a single medical bill related to their workplace injury.
Wage replacement benefits start after a seven-day waiting period. If the employee can't work due to their injury, they receive two-thirds of their average weekly wage, up to a maximum of $1,380 per week in 2025. That's not full pay, but it's designed to help them keep the lights on while they recover.
Here's something that surprises people: North Carolina's workers' comp system is no-fault. That means even if the employee caused the accident—they were goofing around, they made a mistake, whatever—they can still receive benefits. The system is designed to provide support regardless of who's at fault.
If your insurance carrier denies the claim or disputes the benefits, the employee can file Form 18 with the North Carolina Industrial Commission. That starts a more formal process that might involve mediation or a hearing before a deputy commissioner. While employees have two years from the injury date to file a formal claim, it's always better to address issues early.
Getting Started with Coverage
If you're approaching that three-employee threshold—or if you're already there without coverage—now's the time to act. Start by getting quotes from multiple insurance carriers. Because rates can vary and insurers offer different credits, comparing options can save you real money.
Make sure you have accurate payroll figures and job classifications ready when you request quotes. Your premium depends directly on these numbers, so precision matters. And if you're using subcontractors, verify they carry their own workers' comp insurance—get certificates of insurance in writing.
Most importantly, don't wait until after an injury happens. Operating without required workers' comp insurance exposes you to potentially devastating liability. North Carolina takes these requirements seriously, and the penalties for non-compliance can be severe. Getting covered is straightforward, affordable, and absolutely worth the peace of mind.
