What is workers’ compensation insurance?
Workers’ compensation insurance is designed to cover employees’ major injuries and illnesses that require medical attention, which may prevent them from working. It will cover treatment for conditions like carpal tunnel syndrome, sprains, fractures, toxic chemical exposure and repetitive use injuries.
“Workers' compensation insurance is a policy designed to protect your most vital assets—your employees. It covers medical bills and lost wages for employees who get sick or injured while on the job,” says Mordechai Kamenetsky, co-founder of Kickstand Insurance, an online insurance agency that specializes in workers’ compensation coverage.
“Additionally, workers' compensation includes an important component called employer's liability insurance, which kicks in if an employee decides to sue for more money than workers' compensation typically covers,” he adds..
Workers’ compensation is required for small businesses in every state except Texas. However, each state has different rules and regulations around which businesses need to have it. The number of employees you have and the industry your business operates in determine whether workers’ compensation is required.
How much is workers’ comp insurance?
As mentioned above, the average cost of workers’ comp insurance is $45 per month, or $542 per year, according to Insureon.
However, workers’ compensation insurance premiums depend on a variety of factors, including the insurance company that underwrites your policy.
For example, The Hartford advertises that most of its customers with less than $300,000 in annual payroll pay an average of $81 per month for workers’ comp. Progressive states that its average customer pays $119 per month for workers’ compensation. And NEXT says that its policyholders pay $85 per month for workers’ comp, on average.
Which companies offer workers' comp?
Many commercial insurance companies offer workers’ compensation. These are the top 10 largest insurance companies in the workers’ comp market, according to the National Association of Insurance Commissioners (NAIC):
- Travelers
- The Hartford
- AmTrust
- Zurich
- Chubb
- Berkshire Hathaway
- Liberty Mutual
- New York State Insurance Fund
- Blue Cross Blue Shield of Michigan
- Old Republic Group
Workers’ compensation insurance costs by state
Another factor that determines price is location. Workers’ compensation insurance costs are different in every state. Here are the average workers’ compensation insurance rates in some of the most populous states based on data from Insureon:
- California : $62 per month
- Texas: $32 per month
- New York: $38 per month
- Florida: $54 per month
- Pennsylvania: $58 per month
- Illinois: $45 per month
- Georgia: $49 per month
Factors that affect workers’ comp insurance rates
Workers’ compensation insurance companies look at a few factors when calculating premiums. Here are the main ones that will impact the cost of your policy:
- Number of employees: The number of employees on your payroll is used to determine the cost of your workers’ compensation policy. The more employees you have, the more expensive your premium will be.
- Employee classification: When you purchase workers’ compensation, the insurance company will use workers’ comp class codes to determine how likely your workers are to get hurt on the job. This helps insurers calculate premiums based on the amount of risk your business faces across the entire workforce.
- Previous claim history: Businesses that have filed workers’ compensation claims in the past are riskier to insure, and often pay higher premiums. If you have a clean claim history, your premium will likely be less expensive.
- Insurance company: Insurance companies weigh their risks differently and charge rates for workers’ compensation insurance accordingly. To find the most affordable workers’ compensation for your business, it’s important to compare personalized quotes from multiple companies.
- Industry: Insurance companies consider the types of risk your business faces when you get a quote for workers’ compensation. In general, businesses that operate in high-risk industries, like construction and manufacturing, pay higher premiums.
How your industry impacts workers’ comp costs
The business your industry operates in is one of the biggest factors that can affect the cost of workers’ comp insurance. In high-risk industries like manufacturing, agriculture, transportation, security, or construction, there’s a higher likelihood of injuries and illnesses. As a result, businesses in these industries pay higher premiums for workers’ compensation.
The U.S. Bureau of Labor Statistics in 2022 put together a list of the occupations with the highest rate of fatal work injuries. The top jobs:
- Logging workers
- Roofers
- Fishing and hunting workers
- Helpers, construction trade
- Aircraft pilots and flight engineers
- Driver/sales workers and truck drivers
How to lower workers’ comp insurance cost?
There are a variety of ways to reduce the cost of workers’ compensation insurance. Business owners can use these tips to save money:
- Implement safety programs: You can sometimes save money on workers’ compensation if you create and implement an approved workplace safety program or return-to-work program.
- Bundle your policies: Some insurance companies offer a discount to businesses that bundle workers’ compensation with another policy, like general liability insurance.
- Choose pay-as-you-go workers' compensation: Pay-as-you-go workers’ compensation allows your business to pay your premiums throughout the year based on actual payroll, which can help you avoid overpaying upfront.
- Compare quotes: Workers’ compensation quotes vary between carriers. Shop around and compare a few quotes to find the cheapest coverage for your business.