If you have employees, you likely need workers’ compensation coverage. This policy pays medical expenses for work injuries and costs small tech companies about $35 per month.
The cost comes down to the number of employees at an organization. Small tech companies pay an average of roughly $440 per year to more than $600 per year for the policy.
Businesses with a higher risk of worker injuries also pay higher premiums.
Workers’ comp does not have limits for how much it pays out on a covered injury or illness. It typically covers medical costs, part of the wages the employee missed while recovering, and even disability benefits or death benefits. But 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 providing faulty equipment. This policy would cover your legal expenses up to its limits if the case went to court.
Most tech companies choose a $1 million per-occurrence limit and a $1 million aggregate limit for employer’s liability insurance. If you choose higher limits, expect your workers' comp rate to increase.
Insurance companies look at more than the size of your workforce when they decide how much to charge for workers’ compensation. They’ll also look at:
For consistency, most insurance companies use the National Council on Compensation Insurance (NCCI) class code system to determine your level of risk and set insurance rates.
Some jobs are riskier than others – and employees who are more likely to get hurt will contribute to costlier plans.
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.
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’ comp regulations, like California or New York, have higher workers’ compensation premiums. But you might save money if you live in a state like Texas. Texas has low rates and is also the only state that doesn’t require businesses to carry this policy.
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.
There are two easy ways to keep your costs down.
Though it's tempting to cut costs by skipping this coverage when it's not required, even sole proprietors and independent contractors should consider buying this policy. The high cost of medical bills can make it well worthwhile in the long run.
It won't cost a fortune to insure a small tech company. Plus, workers' compensation rates tend to go down over time as businesses are getting better at avoiding workplace injuries.
View our small business insurance cost overview or find out how much you can expect to pay for common types of business insurance.