How much does it cost to get workers’ compensation insurance? | 2022

Workers’ compensation insurance covers medical expenses, lost wages, and other benefits if an employee is injured or becomes ill on the job.

All businesses in most states are required to carry workers’ compensation insurance. Employers pay for workers’ compensation insurance. Although the costs can essentially be passed on to employees in the form of lower wages.

Wondering how much worker’s compensation insurance costs? Would you love a fixed workers’ compensation insurance calculator?

Read this article to find answers to all your questions. The table of contents highlights all the subheadings discussed in this article.

What is workers’ compensation?

Workers’ compensation, also known as “workers’ compensation,” is a government-mandated program that provides benefits to employees who are injured or become ill on the job or as a result of their work.

It is essentially a worker’s disability insurance program that provides cash benefits, health care benefits, or both to workers who are injured or made ill as a direct result of their jobs.

Worker’s compensation is handled primarily by individual states in the United States. The benefits that are required vary greatly from state to state.

Texas is the only state where employers are not required to carry workers’ compensation insurance.

Workers’ compensation benefits may include partial wage replacement for the time the employee is unable to work. Reimbursement for health and occupational therapy services may also be included in the benefit package.

Most workers’ compensation programs are funded by private insurers through premiums paid by individual employers. Each state has a Workers’ Compensation Board, which is a state agency in charge of overseeing the program and mediating disputes.

Federal employees, dock and longshore workers, and energy employees are covered by workers’ compensation programs. The Black Lung Program is another federal program that handles death and disability benefits for coal miners and their dependents.

You can also hire the services of local workers’ compensation insurance companies.

What are Workers’ Compensation Insurance Benefits?

Workers’ compensation requirements differ from state to state, and not all employees are covered in all states.

Some states, for example, exempt small businesses from the coverage mandate. Others have specific requirements for specific industries. The different types of workers’ compensation insurance benefits are:

Salary Replacement

In most cases, the replacement wage paid to an employee under worker’s compensation is less than the person’s full wages. The most generous programs pay about two-thirds of an individual’s gross salary.

Workers’ compensation benefits are generally not taxed at the state or federal level, making up for a significant portion of lost earnings. Beneficiaries who also receive benefits from the Social Security Disability or Supplemental Security Income programs may owe taxes.

Reimbursement of health care costs and survivor benefits

Most workers’ compensation plans cover only medical expenses incurred as a direct result of employment. A construction worker, for example, might seek compensation for an injury sustained in a fall from a scaffold, but not for an injury sustained while driving to the job site.

In other cases, workers may be paid the equivalent of sick leave while on medical leave. Worker’s compensation pays an employee’s dependents if he or she dies as a result of a work-related incident.

The amount paid varies from one worker’s insurance company to another.

Recipients waive the right to sue

Workers give up their right to sue their employer for negligence by agreeing to workers’ compensation. This collective bargaining agreement is intended to protect both workers and employers.

Workers forgo additional resources in exchange for guaranteed compensation, while employers accept some liability and avoid the potentially higher cost of a negligence lawsuit.

What counts in workers’ compensation insurance costs?

Your industry, payroll, and claims history are important factors that influence workers’ compensation premiums. The workers’ compensation laws in your state will also have an impact on your workers’ compensation premium.

  • Industry – When it comes to workers’ compensation, certain industries, such as construction, are more likely to file claims and therefore have higher premiums.
  • Payroll: A company’s annual payroll is used to calculate the cost of workers’ compensation insurance. As a result, when looking for workers’ compensation insurance, you’ll need to know your annual payroll figures.
  • Claims history – If your company has previously filed workers’ compensation claims, your workers’ compensation costs will increase. When determining the workers’ compensation rate for your business, both the number of claims and the severity of the claims will be taken into account.
  • State Laws – The location of your business has an impact on premiums. Each state has its own governor’s compensation laws, and these laws have an impact on insurance premiums.
  • Workers’ compensation insurance premiums are calculated on a one hundred dollar basis.

What does workers’ compensation insurance cover?

Worker’s compensation generally covers the following:

  • The employee’s medical expenses, such as hospitalizations, x-rays and surgeries.
  • When ongoing treatment is required, physical therapy is used.
  • Lost wages occur when an employee takes time off work to recover from a work-related injury or illness.
  • Funeral expenses if an employee dies as a result of a work-related injury or illness

Where can you get workers’ compensation insurance?

The laws of your state govern where you can buy workers’ compensation insurance. Private insurance companies and state-funded workers’ compensation insurance programs are the two main options.

Some states allow businesses to purchase workers’ compensation insurance from private insurance companies or a state-funded program.

Therefore, you need to find the best workers’ compensation insurance company for you. Other states have eliminated all competition and only provide workers’ compensation insurance through state-funded programs.

What are Common Workers’ Compensation Insurance Claims?

According to The Hartford, sprains and strains account for approximately 30% of workers’ compensation claims, often as a result of heavy lifting. In most cases, it takes about 12 days for an employee to return to work after sustaining a workplace injury.

Employees who move merchandise and stock, as well as nursing assistants , can suffer from strains and sprains.

Slip and falls are the second most common cause of workers’ compensation claims, accounting for 27% of all claims, according to The Hartford.

Figures may vary from one workers’ compensation insurance carrier to another.

How to reduce workers’ compensation insurance costs?

Workers’ compensation is an essential component of any small business insurance plan. Here are some suggestions to save money on it.

  • Employee education. Teaching your employees how to perform simple job tasks can help prevent accidents and injuries. For example, you may want your employees to be able to identify and report hazards.
  • Property maintenance. Providing a safe and healthy workplace for your employees can help reduce accidents, injuries and illnesses. Building inspections should be done regularly. Building air ducts must be kept clean. Verify that building maintenance is up to date.
  • Safety regulation. Educating your employees about workplace safety can help prevent slip and falls and other accidents. Spend some time going over safety rules with employees.
  • Appropriate equipment. Provide employees with the most up-to-date personal protective equipment they need to stay safe on the job.

How much does workers’ compensation insurance cost?

Since each state has its own rules regarding workers’ compensation insurance, the cost of a policy will vary depending on where your employees are located.

Businesses with more employees and higher risks pay higher rates for workers’ compensation coverage because workplace injuries are more likely.

The cost of worker’s compensation is determined by:

  • The states your employees work in Your total annual payroll
  • your line of work
  • The nature of your employees’ work.
  • Your past claim history
  • Physically demanding work, as well as a history of workplace accidents, typically result in higher premium rates. The state in which your employees work has a significant impact on the workers’ compensation premium you pay.
  • Workers’ compensation rates are unique because they tend to decline over time, as overall workplace safety continues to improve.

The amount you pay for workers’ compensation is based on a flat rate per $100 of payroll. The type of work performed by your employees (classification rate), your experience modifier (claim history), and your payroll (per $100) are used to calculate your premium.

The employer’s workers’ compensation costs per $100 of covered payroll range from $0.55 in Texas to $2.25 in Alaska. These figures, however, are deceptively simple. They include all types of jobs, so they don’t take into account differences in workers’ compensation insurance costs for low-risk versus high-risk jobs.

How to estimate the cost of workers’ compensation insurance?

What is the average workers compensation cost per employee? The truth is that it depends on your wages and your job.

The cost of workers’ compensation insurance is determined by payroll, regardless of whether the employee is full-time, part-time, temporary or seasonal. Workers’ compensation premiums are calculated in part by total payroll multiplied by the insurance rate for that class of work, as shown in the formula above.

This means that the cost of workers’ compensation insurance per employee is determined in part by how much you pay them. The average cost of workers’ compensation insurance per employee will fluctuate as employees earn raises and as workers come and go. You can also get a workers’ compensation insurance cost calculator to save you stress.

1. Total payroll for each employee

To calculate the cost of workers’ compensation per employee, start with each employee’s gross wages.

Payroll Calculation Tips for Workers’ Compensation Policies. For each employee, use your gross annual earnings.

Calculate projected earnings if you cannot calculate exact earnings for the year (for example, if a worker is paid by the hour). At the end of the policy year, you can adjust your final workers’ compensation premium up or down to account for payroll overstatement or understatement.

Payroll should be rounded to the nearest $1,000. A salesperson, for example, who is on track to earn $72,650 can be reported as earning $73,000. Only employees who are covered by the insurance policy should be included in the total payroll.

2. Find your classification code

If you want an accurate workers’ compensation quote, one of the most important details to get right is your classification code. Class codes are four-digit numbers assigned to companies based on their industry.

Data on workplace injuries and workers’ compensation claims can be collected by grouping similar businesses together.

The rating agency then uses this information to assess the relative risk associated with that type of work and assigns a rate based on recent losses (claims that have been filed and paid).

3. Determine your worker’s compensation rate

While many rating codes are consistent across the country, workers’ compensation premiums are determined by the rate set by the state rating agency or bureau.

Each class code has its rate for worker’s compensation insurance. Find out which agency sets workers’ compensation rates by contacting your state’s workers’ compensation regulator.

Many states in the United States rely on the National Council for Compensation Insurance (NCCI), while others have their state rating office.

You may be able to search or contact the rating office from there to get the rate for your rating code. Workers’ compensation rates are expressed as a cost per $100 of payroll. As an example:

A rate of $1.68 means that a company with $100,000 in payroll would pay $1,680 in workers’ compensation premiums per year. A rate of $0.35 means that a company with $100,000 in payroll would pay $350 in workers’ compensation premiums per year.

This will provide you with an estimate rather than an exact quote. In most states, insurance companies are allowed to deviate from the “recommended rates” of the state rating agency.

In some cases, the recommended rate may be significantly different from what your insurance company offers.

4. Determine the estimated cost of workers’ compensation per employee.

Multiply the rate by the employee payroll to get an estimate of the cost per employee.

As an example: This Hawkins, Indiana plumbing company employs two plumbers who earn about $50,000 per year. He also employs a plumbing apprentice who earns $25,000 per year and a part-time office manager who handles administrative duties and earns $21,000 per year.

To calculate the cost per employee, the owner enters these details into a spreadsheet. Hawkins Plumbing employs a total of 12 people and has an annual payroll of $122,000:

Rates are expressed per $100 of payroll, so divide the plumbers’ and clerks’ payrolls by $100 and then multiply the result by the rate for each class code. Plumbers (NCCI code: 5183) have a workers’ compensation rate of $1.68, while clerical or office workers (NCCI code: 8810) have a rate of $0.35.

Frequently asked questions about how much it costs to get workers’ compensation insurance

Is coronavirus coverage included in workers’ compensation insurance?

Yes. Medical bills, rehabilitation costs, lost wages and other expenses may be reimbursed if the claim is successful. However, you must show that you were infected at work.

Is business interruption covered by workers compensation?

Worker’s compensation covers injuries or illnesses that occur on the job. If your business is temporarily out of business because you can’t pay your employees, this is covered by business interruption insurance.

Are my subcontractors covered by workers’ compensation?

Subcontractors are generally not covered by workers’ compensation because they are independent of your company, meaning they are not your employees.

Who is not required to have Workers’ Compensation insurance?

Besides Texas, all states require workers’ compensation for their employees. However, each state usually has a short list of people who are exempt from coverage. Understanding the insurance requirements where you work is critical.

Do Business Owners Who Employ No One Need To Buy Workers Compensation?

If you own a business with no employees, you are most likely not required by law to have workers’ compensation, especially if you are a sole proprietor, partner, or member of an LLC. However, in more regulated industries, such as construction, this may not be the case.


Workers’ compensation, also known as workers’ compensation, is a type of insurance that provides wage replacement and medical benefits to employees who are injured on the job in exchange for a mandatory waiver of the employee’s right to sue their employer for negligence.


Leave a Comment