How Much Is Workers’ Comp Insurance?

If you own a small business, workers’ comp insurance may be legally required to protect your employees – and your company. How much does workers’ comp insurance cost, though, and what states require you to carry this type of coverage? We answer these questions below.

What Is Workers’ Comp Insurance?

Workers’ comp insurance is a government-mandated insurance scheme. It covers the cost of injuries or illnesses acquired by employees on the job. For example, workers comp covers:

• burn injuries
• industrial illnesses e.g. asbestos-related diseases
• neck and back injuries
• slips and falls
• soft tissue damage

So long as an employee is injured due to a workplace accident, they can usually claim benefits through the scheme. Benefits payable include lost wages and the cost of medical care (death benefits are also payable if an employee dies due to their injury or illness).

Workers’ Comp vs. Business Insurance

We can consider workers’ comp as a type of work-related insurance. However, it’s not the same as business insurance or general liability insurance. These policies protect your business, employees, and customers in different ways – contact InsurePro to discuss your insurance needs.

Who Needs Workers’ Comp Insurance?

The laws vary between states. However, as a general rule, you need workers’ comp insurance if you have a business and you have one or more employees. It doesn’t usually matter if they’re part-time or full-time workers. If you employ workers in the usual course of your business operations, then you need coverage in place to protect them.

Texas is an exception. Businesses in Texas are not required to carry workers’ comp.  

You don’t normally need workers’ compensation insurance if you’re a sole proprietor with no employees, either; however, you might want coverage to protect yourself from work-related accidents.

How Much Does Workers’ Comp Insurance Cost?

The cost of workers’ comp insurance varies considerably from business to business. There are many factors in place that determine how much your workers’ compensation premiums will be.

The four most significant factors are:

• payroll size
• business code
• business location
• claims history

Let’s consider how these variables may affect your workers' compensation rates.

Size of Your Payroll

If you’re looking for a workers’ comp insurance quote, the size of your payroll (i.e. the number of employees) matters. This is because your premiums are tied to your monthly and annual employee wages.

The more employees you have, the more you might pay for workers’ comp. Again, it doesn’t matter if you have part-time or full-time employees – the number of workers on your payroll is what influences your premiums. As a general rule, you need a certain level of coverage for every $100 of your payroll.

Assigned Class Code

Businesses across the US have class codes, or workers’ comp classification codes. These codes are three or four digits long, and they’re used by private insurers to determine the level of risk associated with insuring a business in a certain industry.

For example, perhaps you’re in the construction industry. It may cost more to insure your business than it costs to insure, say, a clerical business, because construction workers are at a higher risk of severe injury on the job.

In other words, higher-risk jobs generally mean higher workers’ comp premiums.

Most states use the codes assigned by the National Council on Compensation Insurance (NCCI), but not all. If you’re not sure which codes apply, you can check with insurance carriers in your state.

Business Location

Your company’s location may also play a role in determining how much you’ll pay for workers’ comp insurance. For example, if you’re located in a city or state with a higher-than-average chance of natural or man-made disasters, you could pay more for workers’ comp. This is because your workers are at an increased risk of being injured on the job.

You may also find that in remote areas, where there’s less competition between insurance companies, you’re quoted higher premiums.

Past Claims History

Insurance companies may consider your claims history when setting your workers’ comp rates. Generally, businesses with no (or very few) past claims are deemed “safer” than businesses with a higher number of past claims.

However, insurers will also consider how long you’ve been in business and the types of claims made before setting your premiums. Your claims history – or your experience rating – is just one factor insurers weigh up when deciding how much workers’ comp insurance will cost you.

Where to Buy Workers’ Comp Insurance

Do you need a workers’ comp insurance quote? Contact InsurePro. We can match you with competitive quotes from a range of private insurance carriers to help you buy the coverage you need for your business. Start a policy with InsurePro today!

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