The average premium for workers' compensation insurance is about $45 per month. Your exact cost will depend on several factors, including your policy limits, business location, and number of employees.
On average, workers' compensation insurance costs $45 per month, or about $542 annually. Almost two-thirds (63%) of policyholders can expect to pay under $60 for their workers' compensation insurance coverage.
Our figures are sourced from the median cost of policies purchased by TechInsurance customers. The median provides a better estimate of what your business is likely to pay because it excludes outlier high and low premiums.
Workers’ comp does not have limits for how much it pays out on a covered workplace injury or illness. It typically covers full-time and part-time employees' medical costs, partial wages, and even disability benefits.
However, most workers’ compensation policies include employer’s liability insurance, which does have limits.
Employer’s liability insurance protects you when an employee sues over their injury. For example, a technician at your telecom company could slip and fall, and blame you for an unsafe environment. This policy would cover your legal expenses up to its limits if the case went to court.
Your coverage limits aren't the only thing that will influence your workers' comp insurance costs.
Your insurance providers will also look at a number of other factors when calculating your premium rates, such as your claims history, number of employees, and location.
For consistency, most insurance companies use the National Council on Compensation Insurance (NCCI) class code system to determine your level of risk and set workers' compensation insurance rates.
Some jobs are riskier than others. And those who are more likely to get hurt will contribute to costlier workers' compensation insurance premiums.
For example, small business owners pay a higher workers' comp premium to cover employees who work with their hands, like computer repair technicians and telecom installers, than employees who work all day in an office.
Some of the most common injuries can happen in any workplace, such as falls. So, regardless of risk level, be sure that all employees are covered under your workers' compensation policy.
The more your employees earn, the higher your workers’ compensation costs. Injured employees can collect partial wages, so your insurance agency will factor your annual payroll costs into your insurance premiums.
Your insurance company will look at your workers’ compensation claims history when it sets your premium.
As part of the calculation, your insurer assigns your company an experience modification factor. This number shows how claims from your company compared to claims from similar companies. If your claims were higher than the norm, you could expect to pay more going forward.
It's simple: The more employees you have, the more opportunities there are for a worker to get injured and/or file a lawsuit.
Though it may be tempting to cut costs by skipping this coverage when it's not required, even sole proprietors and independent contractors should consider getting workers' comp coverage. The high cost of medical expenses can make it well worthwhile in the long run.
Because workers’ compensation laws are set by each state, where your employees work will determine how much you pay for this policy.
For example, states with strict workers’ compensation regulations, like California or New York, have higher premiums. But you might save money if you live in a state like Texas. Texas has low insurance rates and is one of two states that don't require businesses to carry a workers' comp policy.
Because these states are monopolistic, they offer small businesses only one option for getting workers' comp coverage. This means the premiums are already well-established and there isn't as much flexibility on cost compared to other states.
There are things you can do to keep your workers' compensation rates low.
Some strategies include:
When you purchase a workers’ compensation insurance policy, you can pay your premium in annual or monthly installments. The annual option costs less than paying every month.
When assigning a classification code to an employee, be sure you are assigning the right one.
Not only will this help you avoid misclassification fines, but assigning correct codes will help prevent unnecessary overpaying. For example, employees with desk jobs or other jobs with a low risk of injury cost less to insure than high-risk professions.
Business owners can avoid claims and keep rates low by taking steps to reduce work-related injuries.
For some small businesses, getting a pay-as-you-go workers' comp policy is an easy way to save money. This type of coverage offers flexible premiums that change throughout the annual year, depending on how your number of employees and payroll data fluctuate during a 12-month span.
If your small business has few risks and a small number of employees, you may be eligible for a minimum premium workers' compensation policy. This type of workers' comp policy sets your premium charges at the minimum premium (i.e., the smallest amount of money that an insurance company will sell to a business).
For independent contractors, sole proprietors, and other business owners who don't have any employees, you might be eligible for a type of minimum premium policy called a workers' comp ghost policy.
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Insurance premiums vary based on the policies a business buys. View our small business insurance cost overview or find out the average costs for other common types of business insurance.