Because workers’ compensation insurance is regulated on the state level, the cost of a policy depends on where your employees are located. Companies with more employees and risks pay more for workers' comp.
Physically demanding work usually results in higher premiums – so does a history of workplace accidents. The state where your employees work can also influence the cost dramatically. For example, employer costs for workers’ compensation per $100 of covered payroll range from a low of $0.57 in Texas to $2.32 in Alaska, according to the National Academy of Social Insurance [PDF].
However, these numbers are deceptively simple. They encompass all types of jobs, which means they don't reflect the different workers’ comp costs for low-risk versus high-risk work.
Insureon customers pay a median premium of $560 per year, or less than $50 per month, for workers’ compensation. Insureon typically lists median (midpoint) costs, as averages include extremes like high-risk construction businesses that pay much more for workers’ comp.
The average cost of a workers’ comp claim is $40,000, according to the National Safety Council. A workers’ comp premium is likely a much better deal for your business. That’s why small business owners might purchase it even when it’s not required by law.
30% of Insureon's small business customers pay less than $400 per year for workers' compensation insurance and 39% pay between $400 and $800 per year.
About 20% of worker fatalities in private industry occur in construction. The hazardous nature of that industry results in higher premiums. Likewise, the finance and accounting industry has low premiums due to the minimal risks involved in office work.
Businesses with more employees pay more for workers’ compensation. There’s a direct correlation between the number of employees at a business and how much the business pays for a workers’ comp premium.
The amount you pay for workers’ compensation is a specific rate for every $100 of your company’s payroll. Your premium is determined by the type of work done by your employees (classification rate), your experience modification rate (claims history), and your payroll (per $100).
The formula is:
Classification rate x Experience modification rate x (Payroll / 100) = Premium
In most states, you can purchase workers’ compensation insurance from a private insurer. With Insureon, you can compare workers’ compensation quotes from top U.S. carriers. Select your industry and profession in the dropdown below, fill out our easy online application, and we’ll send you quotes that fit your business.
Some states also run their own insurance funds that sell workers' compensation insurance. And in four states – North Dakota, Ohio, Washington, and Wyoming – businesses are required to buy their workers' comp policy from the state fund, which in this case is called a monopolistic state fund.