In Iowa, most employers are required to have workers’ compensation insurance, but it can be tricky to keep track of all the details and requirements. That is why we’ve created this guide covering the specifics, including what workers’ compensation insurance covers and how to remain compliant with laws surrounding these types of policies.
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How do Iowa employers and employees benefit from workers’ compensation?
Workers’ compensation can have benefits for both employees and employers in the state of Iowa. Should an employee experience a work-related injury or occupational illness, workers’ comp can provide medical benefits and partial wage replacement if the injury requires missing time from work to recover.
For employers, a workers’ compensation policy can also provide peace of mind — as in most situations, the insurance offers the company protection from legal claims that might arise if an employee gets sick or injured while working.
Which Iowa employers must have workers’ compensation?
In Iowa, the workers’ comp law requires most employers to provide wage loss and medical benefits to employees who are injured or contract an occupational illness while on the job.
Are there any exceptions?
There are various types of employees or individuals who are not covered by workers’ compensation insurance. Here are some examples:
- Independent contractors, partners in a partnership, or members of an LLC that are not employees are not covered by Iowa workers’ compensation law. If they choose to, each may purchase insurance that expressly includes them.
- Domestic and casual employees who earn less than $1,500 from their employer during the 12 consecutive months prior to the injury.
- Agricultural employees whose employer has a cash payroll of less than $2,500 in the calendar year preceding the injury.
- The spouse of the employer, parents, brothers, sisters, children and stepchildren of either the employer or the spouse of the employer, and the spouses of the brothers, sisters, children, and stepchildren of either the employer or the spouse of the employer.
- Exchange labor in agricultural employment.
- The president, vice president, secretary, and treasurer of a family farm corporation and their spouses, and the parents, brothers, sisters, children, stepchildren, and their spouses of either the officers or their spouses.
- Police officers and firefighters who are entitled to benefits under pension funds established by Iowa Code chapters 410 and 411.
- A proprietor or partner who is actively engaged in the proprietor’s or partner’s business on a substantially full-time basis.
- The president, vice president, secretary, and treasurer of a corporation (other than a family farm corporation), not to exceed four officers per corporation, may elect not to be covered under the workers’ compensation law. In order for the rejection of coverage to be valid, a “rejection of workers’ compensation or employer’s liability coverage”(a form available through the Workers’ Compensation Commissioner’s office) must be completed. (See Appendix O)
- Employees who are entitled to benefits under any rule of liability or method of compensation, for employees, established by the Congress of the United States.
- Members of a limited liability company. Proprietors (independent contractors), partners and limited liability company members are not considered employees but may elect to be covered by purchasing a valid workers’ compensation insurance policy specifically including the proprietor or partner.
Because Iowa’s rules include several exceptions and opt-out options, the table below provides a quick way to see who needs to carry workers’ compensation coverage — and who may decline it.
| Worker or business type | Workers’ comp required? | What to know |
| Most Iowa employers with employees | Yes | Iowa law requires employers to insure liability for work-related injuries and occupational illnesses |
| Employees (full-time, part-time, seasonal, or temporary) | Yes | Coverage applies once an employer hires any workers |
| Independent contractors | No | Not considered employees under Iowa workers’ comp law |
| Sole proprietors with no employees | No | May decline coverage unless they opt in |
| Single-member LLC with employees | Yes | Hiring any employees triggers coverage requirements |
| LLC members, partners, and limited-liability partners | Optional | May file a written nonelection to decline coverage |
| Corporate officers (up to four per corporation) | Optional | May reject coverage by filing a written rejection |
| Agricultural employees (low payroll thresholds) | Sometimes exempt | Depends on employer payroll levels |
| Domestic or casual employees (under income threshold) | Sometimes exempt | Applies if earnings fall below statutory limits |
How much is workers’ comp insurance in Iowa?
There’s no single rate for workers’ compensation insurance in Iowa. Premiums are influenced by factors like your payroll size, job classifications, and claims history. Costs can also vary significantly by industry. Lower-risk roles may cost far less per employee than higher-risk work like roofing or construction.
To provide some context, data from the National Academy of Social Insurance shows that Iowa employers paid an average of $1.10 per $100 of payroll in workers’ compensation costs in 2022, down from $1.36 per $100 in 2018. Your actual costs may be higher or lower depending on your business’s risk profile.
How does an Iowa employer purchase workers’ compensation?
An employer in Iowa may purchase a workers’ compensation policy through a private insurance company or become self-insured by meeting certain requirements of the Iowa Insurance Commissioner. When an employer chooses self-insurance, it means they can pay their own workers’ compensation claims instead of submitting them to an insurance company.
Keep in mind that it is against the law for an employer to take deductions from an employee’s earnings for the purpose of paying workers’ compensation insurance premiums.
When do employees need to communicate an incident to their employer?
An employer must have notice or knowledge of an alleged injury from their employee within 90 days of when it occurred, according to the Iowa Department of Inspections, Appeals, & Licensing. The 90-day period begins to run when the employee knew, or should have known the injury arose out of and in the course of employment.
Per the Iowa Workforce development website, once an employer is aware of the incident, they are responsible for filing a First Report of Injury (FROI) with the Iowa Division of Workers’ Compensation (DWC) within four days when the injury results in:
- Temporary disability for a period longer than 3 days
- Permanent partial disability
- Permanent total disability or death
All incidents (either injury or illness) must be reported through Iowa’s electronic data exchange.
Are there penalties for employers who do not carry workers’ compensation?
Failure to maintain workers’ comp insurance is a serious civil and criminal offense in Iowa. If a company willingly and knowingly lacks coverage, it is a Class D felony. A felony of this level is subject to five years in prison and fine ranging from $750 to $7,500.
Additionally, any employer who fails to provide insurance coverage for eligible employees, as the law provides, may be liable to an employee for either workers’ compensation benefits or for damages in a civil action.
More workers’ comp resources for Iowa employers
Workers’ compensation protects Iowa employees and employers
By having a workers’ compensation policy in place, employers in Iowa go a long way toward keeping themselves compliant, and it’s also the type of coverage that can make a big difference for you and your team. Workers can rest easy knowing that they will be taken care of in the event of work-related injuries or illnesses. And in the vast majority of cases, business owners are protected from litigation due to on-the-job accidents involving employee illness or injury.
Please note all material in this article is for educational purposes only and does not constitute tax, benefits or legal advice. You should always contact a qualified tax, legal or financial professional, in your area for comprehensive tax or legal advice.
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Jon Davis is the Sr. Content Marketing Manager at OnPay. He has over 15 years of experience writing for small and growing businesses. Jon lives and works in Atlanta.