Every state has its own rules when it comes to workers’ compensation insurance, so the cost of a policy will depend on where your employees are located. Companies with more employees and greater risks pay higher rates for workers' compensation coverage, because they’re more likely to face workplace injuries.
Insureon customers pay a median premium of $45 per month, or $540 annually, for workers’ compensation insurance. Insureon typically lists median (midpoint) costs, as averages include extremes like high-risk construction businesses that pay much more in workers’ compensation premium.
The average workers’ compensation claim is $40,000, according to the National Safety Council. By comparison, paying for a workers’ compensation policy that can cover medical expenses, lost wages, and other costs related to a workplace injury, is probably a much better deal for your business. That’s why small business owners may purchase it even when it’s not required by state law.
Your workers' compensation insurance cost will depend on the following factors:
Physically demanding work usually results in higher premium rates – so does a history of workplace accidents. The state where your employees work can also have a big impact on the workers’ compensation premium you’ll pay.
Workers' comp rates are unique because they tend to decrease over time, as overall workplace safety continues to improve.
The amount you pay for workers’ compensation is a specific rate for every $100 of your company’s total payroll. Your workers' comp premium is calculated based on the type of work done by your employees (classification rate), your experience modifier (claims history), and your payroll (per $100).
Employer costs for workers’ compensation per $100 of covered payroll range from a low of $0.55 in Texas to $2.25 in Alaska. However, these numbers are deceptively simple. They include all types of jobs, which means they don't reflect the different workers’ comp costs for low-risk versus high-risk work.
The formula is:
Classification rate x Experience modification factor x (Payroll / 100) = Premium
Many states set their workers’ comp rates based on guidance from the National Council on Compensation Insurance, a workers' compensation insurance rating and data collection bureau. NCCI analyzes trends and makes recommendations based on data from millions of claims and policies. It also has information on how workers' compensation insurance premiums are calculated in many states.
The NCCI also has a searchable database of workers’ comp class codes online. Insurance companies use these classification codes to determine the level of risk for different job classifications, estimate workers' compensation rates, and set premiums.
While a typical Insureon small business customer pays $540 annually for workers’ compensation insurance, 30% of customers pay less than $400 per year, and 39% pay between $400 and $800 per year.
Read on to find out how your industry and number of employees may impact workers' comp insurance costs.
About 20% of worker fatalities in private industry occur in construction. The strong chance of an on-the-job accident means construction companies will pay higher premiums. Likewise, businesses in an industry like finance and accounting will have low premiums, because there’s minimal risk of a work-related injury.
Businesses with more employees pay more in workers’ comp premium. As you grow, the odds that one of your employees could be injured at work go up, and so do your workers’ compensation rates.
In most states, you can purchase workers’ compensation insurance coverage from a private insurer. With Insureon, you can compare workers’ compensation quotes from top U.S. insurance carriers. Fill out our easy online application, and we’ll send you workers' comp quotes that fit your business.
Some states also run their own insurance funds that sell workers' compensation insurance. In four states – North Dakota, Ohio, Washington, and Wyoming – businesses are required to buy their workers' comp policy from the state fund, also called a monopolistic state fund.
You can’t change your industry or the type of work your employees do to make coverage more affordable. There are, however, a couple of steps you can take to keep your workers’ compensation insurance costs down.
You can create a safer work environment and reduce the risk of work-related injuries by:
When you purchase a workers’ comp policy, you have the option of paying premium annually or monthly. Consider paying your premium in annual installments, as many insurers offer discounts to businesses that elect to pay premiums annually.
For some small businesses, it may be more cost effective to get a pay-as-you-go workers' comp policy. This type of policy offers flexible premiums that change throughout the year, depending on changes to your number of employees and your payroll data throughout a 12-month span.
Insurance premiums vary based on the policies a business buys. See our small business insurance cost overview or explore costs for a specific policy.