State Compensation Insurance Fund Options

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Key Takeaways

State Compensation Insurance Fund (SCIF) exists to ensure businesses can get the legally required workers’ compensation insurance coverage they need.
Monopolistic states require businesses with any employees to buy workers’ compensation coverage through the state insurance fund. Competitive states allow you the flexibility to buy coverage through private insurers or through the state if you can’t find coverage elsewhere.
State funds can guarantee access and stability, especially for higher-risk industries like construction, but they often have less flexibility, fewer optional add-on coverages and fewer services compared to private insurers.

Types of State Compensation Insurance Funds

Before you get workers’ compensation coverage, you’ll want to check if your state has a required state compensation insurance fund. For example, if you’re in a monopolistic state like Ohio, you’ll have to buy workers’ compensation through a state insurance fund. But if you’re in a competitive state like California, you have the option to buy coverage through a private insurance company.

Monopolistic State Fund Insurance for Workers’ Compensation

A monopolistic workers’ compensation insurance fund requires businesses to buy workers’ compensation through a state insurance fund. Monopolistic states include:¹

Keep in mind that business owners in these states may not be able to:

Shop around for the best quote: You’ll have to pay the rate that the state sets. Learn more about workers’ compensation laws by state.
Provide coverage for out-of-state employees: You’ll likely have to find separate insurance for them from the state they work in. Learn more about workers’ comp for remote employees.
Get employer’s liability coverage: Employer liability insurance can help cover lawsuits from injured workers and other workers’ compensation case costs like legal expenses.

Be aware that monopolistic programs may not align with the National Workers’ Comp Class Codes (NCCI). So, your workers’ comp class codes could be different and can result in higher workers' comp insurance costs.

Competitive State Compensation Fund for Workers

Some state programs offer workers’ comp through a competitive state compensation insurance fund. A competitive state compensation fund allows business owners to choose workers’ compensation insurance from state agencies or through a private insurance carrier. This flexibility allows you to choose the coverage that best fits your needs. For example, a few states with competitive insurance funds include:²

State Compensation Insurance Fund vs. Private Insurance

So, should a big or small business go with a state comp insurance fund or a private insurer for workers’ compensation coverage? There’s no easy answer.

In a competitive state, the state program may offer comparable rates to better compete with private carriers, but often businesses use the state fund insurance if they can’t get coverage through an insurance company. This could result in a higher rate or less comprehensive coverage than what’s offered through a private insurer.

In addition, private insurers offer other business insurance coverages in addition to workers’ compensation to fully safeguard your operations. State funds don’t offer additional coverage or convenient payment options like Pay-As-You-Go billing. Insurance companies like The Hartford are equipped to cover your business if you operate in multiple states, which may be beyond the jurisdiction of a state fund.

Eligibility for State Compensation Insurance Funds

To qualify for state compensation insurance funds, your business must meet certain eligibility requirements, such as:

Location: Your business must be in a state that legally requires you to use the state fund.
Business type: Eligibility may depend on your industry, and requirements will vary by state.
Business size: Some states set eligibility rules based on how many employees you have.
Insurance status: You may be eligible for state funds if your business was previously declined by a private insurance company.

Find Workers’ Comp Requirements in Your State

Most states require businesses with employees to carry workers’ comp insurance. However, state laws and exceptions can vary, so it’s important to know your local rules and keep your business compliant.

Learn more about your state or find information on workers’ comp insurance coverage for all states.

How Is Workers’ Compensation Insurance Funded Under a State Fund?

Under a state fund workers’ comp program, businesses contribute premiums into a state-managed insurance fund, which covers the cost of workers’ compensation benefits for eligible employees. The state manages how these funds are collected and used, ensuring required benefits are available when needed. This pool of employer contributions can be used to pay for medical costs, lost wages and other mandated benefits if a work-related injury or illness occurs.

Weighing the Advantages and Disadvantages of a State Compensation Insurance Fund

Advantages	Disadvantages
Guaranteed availability of coverage: State funds are designed to be accessible for employers who have trouble finding insurance options in the private market, especially for higher-risk industries like construction and manufacturing.	Limited choice: State funds usually only offer workers’ compensation without any of the bundling options you’d find with a private insurer.
Government-backed stability: State funds exist to fulfill a statutory obligation to protect workers, so employers can be confident that benefits will get paid out.	Less flexibility: State funds may have stricter rules and fewer customization options for deductibles or endorsements than private insurers.
Expertise in state-specific rules: State funds often have a strong familiarity with local statutes, courts and medical systems that can help improve compliance.	Services vary: Because each fund is state-specific, the claims handling experience can be inconsistent, and resources may be limited compared to national insurance companies.
	Reduced innovation and technology: Private insurance companies often invest more in claims technology, advanced analytics, training and safety programs. State funds may be limited by budget or public oversight constraints.

Why Businesses Trust The Hartford for Workers’ Comp Insurance

The right workers’ compensation policy can help protect your employees and your business. If your company is in a competitive state, there are a variety of options you can choose from. Working with a trusted insurance provider like The Hartford means more flexibility, personalized guidance and a partner who understands the unique challenges of running your business.

We’re proud to be an insurance company with more than 200 years of experience helping businesses move forward after unexpected events. Whether you have questions about workers’ comp coverage or need help with a claim, we’re here to help. Contact us at 855-923-2168 or get a workers’ comp quote online today.

State Compensation Insurance Fund Frequently Asked Questions

What Is the Purpose of the State Comp Insurance Fund?

The purpose of the state fund workers’ comp insurance is to ensure that every business can get legally required workers’ compensation coverage, even if a private insurer won’t offer it. It acts as a safety net, so businesses stay compliant with the law and employees have benefits if they’re injured or become ill on the job.

How Is SCIF Different From an Insurance Company?

SCIF is a state-run insurance fund created to ensure businesses can get workers’ compensation insurance, even if they can’t get it from a private insurance company. A private insurance company is independently run and may offer more comprehensive coverage options, resources and flexibility. SCIF’s main role is to guarantee access to legally required coverage.

Keep in mind that SCIF is not limited to monopolistic states, but not every state has one. In monopolistic states, businesses must buy workers’ comp from the state fund. In competitive states, the state fund may exist as an option alongside private insurance companies.

How Do State Compensation Insurance Fund Payouts Work?

If a worker is injured on the job, the State Compensation Insurance Fund (SCIF) pays for approved medical bills and a portion of lost wages directly to the worker or healthcare providers. The payouts would come from the state fund that employers are paying premium into each year. The process is similar to how private insurance companies process and pay out claims, because policyholders pay their premiums in exchange for coverage.