If you have any employees in Nebraska, a workers’ compensation insurance is required. It is also one of the more confusing coverages to price, because the premium is dependent on your payroll, your industry classification, and your claims history, not a flat rate. The premium is estimated for the term and once the term has expired, an audit is performed to calculate your actual premium due or what refund is due you.
Here is what Nebraska requires, who is exempt, what happens if you skip it, and how the premium actually gets calculated.
KEY TAKEAWAYS
- Nebraska requires workers’ compensation insurance for nearly every employer with one or more employees. There is no minimum employee count exemption for most businesses.
- Real exemptions exist for sole proprietors and partners (who can choose to cover themselves), certain corporate officers, and employers whose only workers are family members in an agricultural operation. Ag business normally opts for coverage on their Ag policies, but some insurers still require workers compensation policies rated for the agriculture risk classification.
- Skipping coverage when it’s required carries real penalties: a civil fine of up to $1,000 per day of noncompliance, possible criminal charges, and loss of the legal protection that normally limits an injured employee to a workers’ comp claim instead of a lawsuit. Meaning the business is personally responsible for the cost of the entire loss, medical and lost wages. There may be judgments against the employer also.
- Premiums are calculated from your payroll, a classification code tied to the type of work being done, and an experience modification factor based on your claim history, not a flat per-employee fee.
Who Actually Has to Carry Workers’ Comp in Nebraska
Under the Nebraska Workers’ Compensation Act, coverage is required for essentially every employer in the state who has one or more employees in the regular course of business. There is no small-employer exemption like some states have; a single employee is enough to trigger the requirement for most businesses.
The real exemptions are narrower and more specific: (refer to you state worker’s comp court for up-to-date information)
- Sole proprietors and partners are not required to cover themselves, though they can elect to opt in for their own coverage.
- Corporate officers who own 25% or more of the company’s stock can elect to opt out of coverage for themselves specifically, while their employees remain covered.
- Agricultural operations employing only related family members are exempt, but this exemption is narrow. If the operation employs unrelated workers, it loses this exemption unless it stays under the general small-employer threshold described below.
- Employers of unrelated workers below a specific size threshold in agriculture and a few other categories can be exempt, but only if they employ fewer than 10 unrelated, full-time employees on each working day for 13 calendar weeks (consecutive or not) in a calendar year. Cross that threshold and coverage becomes mandatory.
- Domestic servants and certain federal or railroad employees fall under separate rules or federal jurisdiction rather than the state act.
Watch Out
These exemptions are narrower than most business owners assume. If you’re not certain whether your business qualifies for one, confirm it with your agent or the Nebraska Workers’ Compensation Court before deciding to go without coverage.
What Happens If You Don’t Carry Coverage
Nebraska takes noncompliance seriously. An employer required to carry workers’ compensation who does not can face a civil fine of up to $1,000 for each day the business goes without coverage, since each day of continued noncompliance counts as a separate violation. Criminal charges are also possible, and the state can seek an injunction to stop the business from operating until it comes into compliance.
There’s a second, often overlooked consequence. Workers’ compensation is normally the exclusive remedy for an on-the-job injury, meaning an injured employee generally cannot sue their employer directly; they file a workers’ comp claim instead. An employer who fails to carry required coverage loses that protection. An injured employee can then choose between a workers’ comp claim or a direct lawsuit at common law, which exposes the business to potentially much larger damages with no policy limit protecting it.
Good to Know
Some businesses that hire subcontractors assume the subcontractor’s insurance covers everything. Nebraska law can hold a principal employer jointly liable for an uninsured subcontractor’s employee injuries. Verify certificates of insurance for any subcontractor working on your job site includes Workers Comp coverage.
How Your Premium Actually Gets Calculated
Workers’ comp premium isn’t a flat fee per employee. It’s calculated roughly as: (payroll ÷ 100) × classification rate × experience modification factor.
- Payroll is your total wages for covered employees, the base the rate is applied to.
- Classification rate is a per-$100-of-payroll rate tied to the risk level of the work being done. An office employee’s classification rate is far lower than a roofer’s or a machine operator’s.
- Experience modification factor (e-mod) compares your claims history to other businesses in your same classification. An e-mod below 1.0 reflects a better-than-average claims record and lowers your premium; above 1.0 reflects a worse record and raises it.
- Expense Constant is a fee charged by the insurer for the Workers Comp policy, normally $100 to $ 200 per policy year.
This is why two businesses with the same number of employees can pay very different premiums. A construction company with a high classification rate and a recent claim will pay substantially more than a professional services firm with low-risk job duties and a clean claims history.
Next Step
If your e-mod is above 1.0, this is due to your company’s claims history. Ask your agent whether a safety program could bring it down over time. A lower e-mod compounds into real savings every renewal. Businesses that promote a safe work environment by being proactive usually have lower mod factors as a benefit.
Getting Classifications Right
Misclassifying employees, either by job duty or by treating someone as an independent contractor when they function as an employee, is one of the most common and costly mistakes in workers’ comp. It can lead to a premium audit adjustment (an unexpected bill after the policy year ends) or, in the case of contractor misclassification, exposure to claims the policy was never priced to cover. If your business has employees doing more than one type of work, make sure your policy reflects the actual mix.
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Frequently Asked Questions
Is workers’ compensation insurance required in Nebraska?
Yes, for nearly every employer with one or more employees. There is no general small-business exemption based on employee count for most industries. Narrow exemptions exist for sole proprietors, partners, certain corporate officers, and agricultural operations employing only related family members, but most businesses with any employees must carry coverage.
What happens if I don’t carry workers’ comp when it’s required?
Nebraska can fine an noncompliant employer up to $1,000 for each day coverage is missing, pursue criminal charges, and seek an injunction to stop the business from operating. You also lose the legal protection that normally limits an injured employee to a workers’ comp claim, meaning they can sue you directly at common law with no policy limit protecting the business. Refer to the Workers Comp court for up-to-date penalties and fines.
How is my workers’ compensation premium calculated?
Premium is calculated roughly as (payroll ÷ 100) × a classification rate tied to the risk of the work being done × an experience modification factor based on your claims history compared to similar businesses. Higher-risk work and a adverse claims history both increase your e-mod the rate; a clean claims record can lower it over time.
Can a business owner opt out of their own workers’ comp coverage?
Sole proprietors and partners are not required to cover themselves and can choose to opt in if they want the protection. Corporate officers who own 25% or more of the company’s stock can elect to opt out of coverage for themselves specifically, while coverage for the rest of the company’s employees is unaffected.
Am I liable if my subcontractor’s employee gets hurt on my job site?
Potentially, yes. Nebraska law can hold a principal employer jointly liable for injuries to an uninsured subcontractor’s employees. Before work begins, verify that every subcontractor on your job site carries their own active workers’ compensation coverage and request a current certificate of insurance.
Jeff Munns, Licensed Insurance Agent — August 2026. Jeff Munns Agency serves Lincoln, Nebraska and surrounding areas. Content is for informational purposes only and does not constitute insurance or legal advice. Coverage requirements and rates vary and are subject to underwriting. Consult your agent or the Nebraska Workers’ Compensation Court for guidance specific to your situation.
Note: The examples and descriptions used throughout this article are for general information purposes only, not legal advice. All scenarios presented are fictional, any similarity is merely coincidental. Coverage is not guaranteed, rather they are subject to the decision of insurance underwriters and other authorities. Policy/coverage availability and limits can vary based on person, location and other variables. Please consult your insurance agent and review your insurance policies to understand your existing coverage and/or potential coverage options. Read our disclaimer.
