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 coverages to comply with state regulations and protect both the company and its workforce.

Mandatory Insurance Types

• Workers' Compensation Insurance:

  Illinois law requires most employers with one or more employees to carry workers' compensation insurance. This coverage provides medical benefits and wage replacement to employees injured on the job. It also protects employers from potential lawsuits related to workplace injuries.

• Unemployment Insurance:

  Employers must register with the Illinois Department of Employment Security (IDES) to pay unemployment insurance taxes. This insurance supports employees who lose their jobs through no fault of their own.

• Employer Liability Insurance:

  This insurance is often included with workers' compensation policies and covers legal costs if an employee sues over a workplace injury not covered by workers' compensation.

Additional Insurance Considerations

• Health Insurance:

  As of 2026, businesses with 50 or more full-time employees must comply with the Affordable Care Act (ACA) employer mandate by offering health insurance. Smaller employers may choose to offer health benefits to attract and retain talent.

• Commercial General Liability Insurance:

  While not required by law, this insurance protects your business from third-party claims of bodily injury or property damage and is recommended when hiring employees.

Operational Steps Before Hiring

• Obtain a workers' compensation insurance policy through a licensed insurer or the Illinois Workers' Compensation Commission.
• Register your business with the Illinois Department of Employment Security to set up unemployment insurance tax accounts.
• Maintain accurate payroll and insurance records to ensure compliance and facilitate reporting.
• Review employee classification carefully to avoid misclassification, which can affect insurance requirements and costs.

Ensuring these insurance coverages are in place before hiring employees is critical to meet Illinois operational compliance and to safeguard your business against workplace risks.