How Much Does Workers' Compensation Insurance Cost?
The cost of Workers' Compensation Insurance, also called Workmans' Compensation, can vary greatly depending on specific risk characteristics of the business being insured. Because each business is different, there is no standard cost for Worker’s Compensation Insurance. There are several factors that may figure into the calculation of the cost of Workers’ Compensation Insurance for a given business. Some of these factors are:
- Laws in the state the company does business in
- The size of payroll
- The types of work employees do and the related risks
Workers' Compensation Insurance is a coverage that helps provide benefits to employees who are unable to work because of work-related injuries or illnesses. It can also provide benefits to a worker’s beneficiaries if the worker dies because of a work related injury or illness. Workers’ Comp coverage is provided by the employer to the employees. Most states require employers to buy this insurance.
Workers' Compensation Insurance benefits vary depending on the state the employee and the business they are in. Typically though, the benefits help cover medical expenses such as hospital visits, medications, emergency surgeries and the wages lost while the employee is unable to work due to a covered incident. The benefits can also include coverage for continued treatments such as physical therapy and ergonomic accommodations when the employee returns to work. Without Workers’ Compensation Insurance, employees might be stuck with the bill for these medical expenses. Employees might also be financially strained if they are unable to work because of a covered injury or illness.
How Workers' Compensation Insurance Is Calculated
The cost of Workmans' Compensation Insurance is typically calculated based on several factors. Some of these factors may include: state requirements, number of employees, payroll, and the risk class of the type work being done.
- State Requirements: Each state has its own requirements for Workers' Compensation Insurance. Most states will require businesses with employees to buy Workers’ Compensation Insurance but there are exceptions. For example, in some states businesses with five or fewer employees may not need to buy Workers’ Compensation Insurance. States may also dictate coverage requirements. It’s important to understand your legal obligations regarding Workers’ Comp; consider consulting a business insurance professional about the Workers’ Compensation Insurance requirements for the states where you do business.
- Number of Employees and Payroll: Workers’ Comp Insurance helps pay an employee’s wages while the employee is unable to work because of a work related injury or illness. Higher wages typically mean the business will have to pay higher Workers’ Comp premiums to cover lost wages if an employee cannot work due to a covered work related injury or illness. Also, more employees may mean there is a higher probability of one or more employees sustaining a covered injury or illness.
- Types of Work: Certain lines of work can present higher levels of risk than others. For example, think of the work risks to an accountant compared to those of a tree surgeon. Typically, riskier types of work that present greater potential for physical injury, illness or death cost more to insure with Workers’ Compensation.
How Do Workers' Comp Class Codes Impact Insurance Costs?
Workers’ Comp class codes are given to specific job types. These codes describe the level of risk for the job type and help determine what a business will pay for Workers’ Comp. There are around 700 class codes used by the NCCI (National Council on Compensation Insurance). The NCCI is an independent council funded by insurance groups to help determine the statistical dangers and risks of businesses and job types.
So as an example, construction workers may be given class codes of 5606. Graphic designers may be given a class code of 4301. It’s likely that the graphic designers’ class code represents a lower risk level than the construction workers’ class. This means it will probably cost less to cover a graphic designer with Workers’ Compensation Insurance than it will to cover a construction worker.
So it follows that having more high-risk class-code-employees will result in a higher Workers’ Compensation premium cost to a business.
Workers’ Comp Costs by State
Each state determines its regulations and requirements for Workmans' Compensation Insurance. Most states require businesses with employees to buy Workers’ Comp Insurance. The difference in requirements and regulations can vary significantly between states. Some states don’t require micro-businesses to buy Workers’ Comp Insurance. This can mean businesses with five or fewer employees don’t need to buy Workers’ Comp Insurance. Certain types of employees can also be exempt depending on their state’s rules.
Alabama is one such state. It only requires businesses with five or more employees to have Workmans' Compensation Insurance. Alaska, on the other hand, requires businesses with one or more employees to carry Workers’ Compensation Insurance.
Some states have exemptions for certain types of employees. In New Mexico, real estate agents and farm or ranch hands do not need to be covered. New York is different. With the exception of sole proprietors and business partners, New York requires almost all employees to be covered by Workers’ Compensation Insurance.
Several states make exemptions for family members who are also employees. In North Dakota, children under the age of 22 who work for their parents do not need to be covered by Workers’ Compensation Insurance.
Depending on the specific Worker’s Comp variables and factors that determine the cost of your Workers’ Comp premium, you may have to pay higher than the average or lower than the average cost for the state you do business in.
How to Get the Best Price on Workers' Comp Insurance
Buying Workers’ Compensation Insurance can feel daunting. Because of state regulations, there are many factors that you have to take into consideration. Buying becomes even more complex if you will be doing business across state lines. That’s why it’s important to work with an insurance company that has deep experience working with businesses on Workers’ Compensation solutions. The Hartford has been insuring businesses for over 200 years. We’ll work with you to help make sure your business and employees are covered and compliant with state regulations.
Whether you are a large corporation, a small business, or a start up with big ambitions, we can help you find the right coverage for your business’s unique needs and budget. You can rest easy knowing that The Hartford is looking after your business and employees.
Learn how you can help protect your business and employees with Workers’ Compensation Insurance from The Hartford. Get a quote today.