How Much Does Workers' Compensation Insurance Cost?

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How Much Does Workers' Compensation Insurance Cost?

Workers' Compensation Insurance is unlike any other type of small business insurance in that it is regulated by the states. In fact, 49 states require all businesses with employees to carry Workers' Compensation Insurance (the exception is Texas). While this means that having Workers' Comp is a unifying thread for businesses with employees, it also means the cost of this coverage varies significantly from one state to another.

Why? It's like anything else regulated by the states: when you have 50 different governing bodies solving a problem, they'll likely solve it in 50 different ways. For example: in Colorado, the rules explicitly state that you can exempt yourself from coverage if you're a volunteer for a ski-area operator. In Florida, rules note that construction professionals are required to carry coverage for themselves, even if they have no employees.

For an overview of laws around the country, check out our state-by-state guide to Workers' Compensation laws.

Naturally, varying coverage requirements come with varying prices. Below is a map that shows how much Workers' Compensation Insurance costs around the United States, per $100 in payroll.

Average Cost of Workers' Compensation Insurance Per $100 In Payroll By State

Per $100 in employee wages, Workers' Comp costs in the United States ranged from $.75 in Texas to $2.74 in Alaska as of this report data. But those numbers are deceptively simple: they encompass all types of jobs, which means they don't reflect the variations within states that account for different risk levels.

REPORT: Workers' Compensation: Benefits, Coverage, and Costs, 2012
Table 14
August 26, 2014
National Academy of Social Insurance

The Effect of Workers' Comp Class Codes on Insurance Costs

The National Council on Compensation Insurance (NCCI) is an independent body that regulates and oversees Workers' Compensation issues in much of the country. The NCCI has developed a system of classification codes ("class codes") to categorize the kinds of work people do. Currently, there are more than 700 codes. Each one denotes a specific type of work and corresponds with lots of research on the risks associated with that work and the injuries it exposes people to. The riskier a profession, it costs to buy Workers' Comp for an employee in that profession.

So if you employ three proofreaders, you'll likely have to pay less in Workers' Compensation costs than if you employed three lumberjacks.

Here's a look at how much Workers' Comp costs in a few key sectors of private industry.

Employer costs per hour worked for workers' compensation insurance: Private industry workers


US Dept. of Labor
Bureau of Labor Statistics
Employer Costs for Employee Compensation (
Table 5. Private industry, by major occupational group and bargaining status (
December, 2014

As you can see, those with employees in natural resources, construction, and maintenance pay far more for Workers' Comp Insurance ($1.07 per hour, or 3.1% of total compensation) than those whose employees are doing sales or office work ($.22 per hour, or 0.9% of compensation). With this piece of the puzzle, it's easy to see one factor driving Workers' Comp costs so high in Alaska: much of that state's economy depends on the extraction of natural resources.

How Workers' Compensation Costs Are Changing

Because Workers' Compensation is regulated at the state level, changes tend to happen piecemeal, as individual states pass new laws and institute new policies. In the last 25 years, though, the general trend in Workers' Compensation Insurance costs has been downward — to the extent that some critics are raising the alarm that they're no longer adequate to protect workers with the most serious injuries. Here's what that means for small-business owners:

  • For the moment, Workers' Comp costs are lower in most of the country than they've been in two and a half decades.
  • In Florida, a judge recently ruled that Workers' Comp benefits had dropped to such an extent that they are no longer a fair exchange for workers' waiving of their right to sue over injuries. While this decision is in appeals, if it stands, it could mean that employers are once again open to lawsuits over employee injuries.

Interested in purchasing Workers' Compensation Insurance for your business? Complete an online insurance application, and one of our agents will contact you with quote options available.

Dig Deeper into Insurance Costs

Insurance costs vary greatly based on the type of insurance a business buys. Learn more about how much each of these insurance policies costs for small businesses.

To see what GL and other insurance policies cost for businesses in your industry, check out our industry-specific cost analysis:

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