How Much Does Workers’ Comp Insurance Cost?
The price you’ll pay for workers’ compensation insurance
depends on several factors unique to your business. So, there’s no standard cost for workers’ comp insurance or workman’s comp. Businesses can pay an average of $40 a month for coverage, but insurance companies can use different factors to determine workers’ compensation insurance costs, like:
Employees’ type of work
Most states require employers to provide workers’ comp insurance to employees. It provides benefits if an employee gets hurt or sick from their job. It can also give death benefits to an employee’s family if they lose their life after a work-related injury or illness.
How Is a Workers’ Comp Premium Calculated?
Not all workers’ comp costs are the same. Several factors that can affect workers’ comp rates
Workers’ compensation laws vary between states. Most require businesses with employees to have workers’ compensation insurance, but there may be exceptions. For example, Arkansas
small business owners with less than three employees don’t need coverage. It’s a good idea to work with a business insurance specialist
to make sure you understand and comply with your local laws.
The Number of Employees and Payroll
The bigger your staff, the more it’ll cost for workers’ comp coverage. That’s because your business’ payroll is part of the premium calculation for workers’ compensation insurance. Your cost is calculated per $100 of payroll. So, the larger your payroll, the higher your costs.
Types of Work Done by Employees
Jobs with higher levels of risk result in higher workers’ comp costs. For example, an accountant faces a lower risk of injury than a lumberjack. Riskier work that has a greater potential for workplace injuries, illnesses or death can cost more to get coverage.
How Do Workers’ Comp Class Codes Impact Insurance Cost?
The National Council on Compensation Insurance (NCCI) maintains over 700 class codes
. The NCCI bases these class codes on the types of jobs that workers do and it helps insurers calculate workers’ compensation rates. Having more high-risk class code employees can result in a higher workers’ compensation cost.
A formula you can use to help estimate your business’ workers’ comp costs is:
Workers’ Classification Code Rate X Experience Modification Number X (Payroll / $100) = Premium**
In some states, your workers’ compensation claims history determines your experience modification number. If your business has a clean history, your experience modification number may be below 1.00. Numbers greater than 1.00 mean your business has a history of claims.
Workers’ Compensation Costs by State
Workers’ compensation insurance requirements and regulations can vary significantly between states. Differences range between the number of employees that will require coverage to whether part-time employees need coverage. Depending on the laws, it can impact your workers’ comp insurance cost.
Some states don’t require micro-businesses to buy workers’ comp insurance
. This means you may not need coverage if you have fewer than five employees. Alabama
requires businesses with at least five employees to have workers’ compensation insurance. Most states, however, require businesses with at least one employee to have coverage.
Some states may also exempt certain employers from coverage requirements. In New Mexico
, real estate agents and ranchers don’t need coverage. Sole proprietors and business partners in New York
are also exempt.
Several states make workers’ comp exemptions for family members who are employees. In North Dakota, children younger than 22 who work for their parents don’t need workers’ compensation insurance coverage.
What Is the Average Workers’ Comp Rate?
Just like requirements vary between states, rates also differ across the U.S. In Oregon, employers will pay $1 per $100 of payroll for workers’ comp in 2021.1 In California, the average workers’ compensation premium in 2021 is $1.56 per $100 of payroll.2
How to Get the Best Price on Workers’ Comp Insurance
Buying workers’ compensation insurance can feel daunting. With state regulations, there’s a lot of factors to take into consideration. And working across state lines may make the process even more complicated. That’s why it’s important to work with an insurance company experienced with workers’ compensation.
At The Hartford, we’re backed by more than 200 years of experience and our specialists are ready to help you get the business insurance coverage you need. No matter the size of your business, we can help you find the right coverage for your unique needs and budget. Get a quote today and learn how you can protect your business and employees with workers’ compensation insurance from The Hartford.
** This is a simplified calculation for educational purposes only. Actual premium calculations can be more complex. Experience mods are subject to state requirements and do not apply to every policy.
1 State of Oregon, “Oregon Workers’ Compensation Costs”
2 Insurance Journal, “Oregon Workers’ Comp Costs Dropping for 8th Straight Year”