What insurance is required before hiring employees?

Required Business Insurance Before Hiring Employees in Illinois

Before hiring employees in Illinois, businesses must secure specific insurance coverage to comply with state regulations and protect both the company and its workforce.

Workers' Compensation Insurance

Workers' Compensation Insurance is mandatory for most employers in Illinois once they hire at least one employee. This insurance covers medical expenses and lost wages if an employee is injured or becomes ill due to work-related activities.

• Obtain coverage before the first employee starts work.
• Maintain proper documentation and keep records of claims.
• Non-compliance can result in fines and penalties.

Unemployment Insurance

Illinois requires employers to register for Unemployment Insurance through the Illinois Department of Employment Security (IDES). This is not an insurance policy you purchase externally but a state program funded by employer payroll taxes.

• Register with IDES within 30 days of hiring your first employee.
• File quarterly wage reports and pay unemployment taxes on time.

Additional Insurance Considerations

While not legally required, consider the following insurance types to manage operational risks effectively:

• General Liability Insurance: Protects against third-party claims of bodily injury or property damage.
• Employment Practices Liability Insurance (EPLI): Covers claims related to wrongful termination, discrimination, or harassment.
• Disability Insurance: Illinois mandates participation in the state disability program for certain employers.

Operational Tips

• Confirm your insurance coverage aligns with the number of employees and business activities.
• Use payroll systems that integrate tax and insurance reporting to streamline compliance.
• Keep thorough records of insurance policies, employee classifications, and claims.
• Review insurance requirements annually or when expanding your workforce.

As of 2026, staying updated with Illinois Department of Labor and IDES guidelines ensures compliance and smooth business operations.