The cost of workers' compensation insurance depends on a few factors, including your business location, number of employees, and your industry risks. Small businesses pay about $45 per month for this policy.
Insureon customers pay an average of $45 per month, or $542 annually, for workers' compensation insurance.
Our figures are sourced from the median cost of policies purchased by Insureon customers. The median offers a better estimate of what your business is likely to pay because it excludes high and low premium outliers, like high-risk installation businesses that pay much more for workers’ compensation.
The average workers' compensation claim is $41,350, 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.
While Insureon's small business customers pay an average of $45 monthly for workers’ compensation coverage, 23% pay less than $30 per month and 40% pay between $30 and $60 per month. The cost depends on your business's risks, location, claims history, and number of employees.
Your workers' compensation insurance premium will depend on the following factors:
Physically demanding work usually results in higher premium rates – so does a history of workplace accidents. Workers' comp rates are unique because they tend to decrease over time, as overall workplace safety continues to improve.
The state where your employees work can have a big impact on the workers’ compensation premium you’ll pay. Each state has its own workers' compensation laws, and each state has a rating bureau that sets the baseline rate used in calculating how much you’ll pay in insurance premiums.
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.
Just as most states require by law that businesses with employees purchase workers' comp, they also typically mandate that small business owners carry commercial auto insurance if they have business-owned vehicles.
Businesses with more employees pay more for workers’ comp. As your business grows, the odds that one of your employees could be injured at work go up, and so do your workers’ compensation rates.
Your payroll, worker classifications, and claims history also influence your premium.
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 [PDF] per $100 of covered payroll range from a low of $0.46 in Texas to $1.78 in Wyoming. 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 for calculating a workers' comp premium 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.
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.
Depending on the industry that you work in, such as construction or cannabis, you may be required by your state to carry general liability insurance. For other businesses, such as those in real estate, insurance, or healthcare, you may need professional liability insurance (also called errors and omissions insurance) before you can get a license.
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.
Though you can't change your industry or the type of work your employees do, there are steps you can take to keep your workers' comp premium low.
Keep in mind that having coverage often saves you money in the long run. Beyond the obvious benefit of shielding you from medical bills, proof of insurance can help you land contracts with potential clients. That's why some business owners who might be exempt still choose to carry coverage, such as independent contractors and sole proprietors.
Here are a few strategies to help you reduce your workers' comp costs.
To create a safer work environment and reduce the risk of work-related injuries, you can:
When you purchase a workers’ comp policy, you have the option of paying monthly or annual premiums. Consider paying your premium in annual installments, as many insurers offer discounts to businesses that elect for annual payment.
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.
Some small business owners may be eligible for a minimum premium workers' compensation policy, which sets your premium charges at the minimum premium (i.e., the smallest amount of money that an insurance company will sell to a business). Small businesses that benefit from this type of policy often have few risks and a small number of employees.
For business owners who don't have any employees, such as independent contractors or sole proprietors, you may be eligible for a minimum premium policy called a workers' compensation ghost policy.
Insurance premiums vary based on the policies a business buys. See our small business insurance cost overview or explore costs for a specific type of insurance.