The cost of workers compensation insurance varies significantly, depending on factors like state, business type, number of employees, and claims history. Typically, premiums range from $600 to $1,500 annually. High-risk industries often pay more. Rates are calculated using a formula that includes payroll x class code rate per hundred dollars of payroll.
If a business employs more than two people, it’s required by law in some states for the business to have workers compensation insurance coverage. Workers compensation insurance coverage, also called workman’s comp, provides benefits to employees who attain injury or incur sickness while performing duties within the scope of their job posting.
These benefits cover lost wages, hospital, and medical expenses, rehabilitation, and even (God forbid!) death-related costs for the employee’s family should death occur while on the job. You can read more about what this does and doesn’t cover here.
A workers compensation insurance policy is purchased by the business itself from an insurance provider and looks to offer some form of protection for both the business and the employee, though some states have available funding for this type of insurance and actually prohibit private insurance companies from offering this as part of their insurance plans.
Depending on your location, each state has its own way of calculating the workers compensation insurance rate. The more employees you have, the higher in premium you’ll have to pay. The premium rate also depends on the nature of your business and if there is a significant probability of attaining workplace injuries.
Workers compensation insurance premiums usually depend on:
When It comes to the Average Cost Of Workers Comp Insurance, there isn’t one “average”. The better question might be “What is the average cost of workers comp insurance for electricians?” The type of business, or work being performed by your workers drives work comp insurance rates so much…you have to drill down on the actual sector.
The type of work that relies heavily on the physical strength of your employees (such as construction, landscaping, and cleaning services) typically would pay higher in premiums for this kind of insurance as there is a higher risk of workplace accidents.
What’s unique about this insurance policy is that the rates tend to decrease over time as overall workplace security tends to improve.
AVERAGE COST: There is no “set” or average cost of workers compensation insurance. A small business will typically pay anywhere from $600 to $1,500 per year.
A simple formula you can use to give you a ballpark figure on how much you’ll have to pay for workers compensation insurance is:
Premium = (Payroll/$100) x Class Code Rate x Experience Rate Modification
We’ll explain all these variables one by one.
The National Council on Compensation Insurance (NCCI) lists over 700 class codes. The class codes depend on the job type and what the level of risk for each job type is. This helps determine how much a business will have to pay for workers compensation insurance.
Class codes are determined by risk factors, and the higher the risk factor is, the more you’ll have to pay for a premium. A business in finance and accounting definitely won’t pay as much as, say, the construction business, because its workers aren’t in any obvious immediate danger.
Your business’ claims history determines the experience rate modification. A number greater than 1.00 means that your business has quite a history of claims, and any number below 1.00 means a good claims history.
DID YOU KNOW? In North Carolina a business must have a annual premium amount of $13,500 or an average 2-Year Premium of $6,750 to qualify for an Expereience Mod. If a business does not meet these criteria, the assumed Rate Mod is 1.00
Policies and regulations for the workers compensation insurance rate vary vastly among states.
Certain employers and natures of businesses are exempt from this policy, like sole proprietors in New York, and real estate agents in New Mexico for example.
The number of employees you have also plays a factor. In some states, if your business has less than five employees, you are not required to have any coverage. In Alaska, however, if you are a business owner and you have even a single employee then you are required to have a premium.
It’s not possible to change the nature of your business in order to save up on insurance costs, but there are a few ways that you can make your workplace safer for your employees and minimize workplace risks and injuries. Here are some examples of this:
You can also opt to pay your premium annually to save up on costs. Some insurance companies offer discounts to businesses that pay their premiums in full, all in one go.
Navigating the complexities of workers compensation insurance requires expert insight, especially given the varying costs influenced by multiple factors.
It takes specialized knowledge and experience to craft the right insurance solution, that will provide you with the peace of mind needed to focus on your business’s growth and success.
Contact an ALLCHOICE Insurance Advisor today for tailored guidance and support.
Give us a call at 1-844-540-0463 or Get Your Workers Compensation Insurance Quote Online NOW .