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Average Cost of Workers' Compensation Insurance in the U.S. (And Why)

When shopping for workers’ compensation insurance, you’re probably wondering:

What is the average cost of workers’ compensation insurance? And how much can I expect to pay?

An individual policy’s cost depends on a number of factors, but let’s start with benchmarking rates across the country.

Median Rate in Most U.S. States

The Oregon Department of Consumer and Business Services published the median rate paid by companies in each state, which range from $2.00 to $2.49 to under $1.50. (We cover the difference between workers’ compensation rates and cost here.)

In the majority of U.S. states, the median rate is under $1.50. This means that:

  • A business with a payroll of $100,000 would pay less than $1,500 annually for workers’ compensation insurance.
  • A business with a payroll of $50,000 would pay less than $750 for a 12-month workers’ compensation premium, or around $60 per month.

The latest data shows that 29 states (58%) have a median rate of less than $1.50. Another 15 states fall into the $1.50 to $1.99 range, followed by three at $2.00 to $2.49.

Next, let’s look at the workers’ compensation rates where most Americans live.

Median Rate in Most Populated U.S. States

Let’s take a closer look at the median price in some of the country's most populated states:

  1. California: $2.00 to $2.49
  2. Texas: Under $1.50
  3. Florida: Under $1.50
  4. New York: $2.00 to $2.49
  5. Pennsylvania: $1.50 to $1.99
  6. Illinois: Under $1.50
  7. Ohio: Under $1.50
  8. Georgia: $1.50 to $1.99
  9. North Carolina: Under $1.50
  10. Michigan: Under $1.50

Why Are Rates in My State Higher?

In the U.S., workers’ compensation is regulated at the state level, with each state dictating laws regarding coverage and rates. So, understanding how your state is regulated will help you find out how much your coverage will cost, and how your state compares.

Why Costs Differ Between Businesses

Workers’ compensation costs differ between businesses based on several factors, including: the state where employees work, the type of work they perform, the size of the business and individual claims history.

Let's set aside location for now and focus on the other three:

  • Industry: Your business is evaluated based on the potential risk for physical injury or illness. The riskier the business, the higher the workers’ compensation premium. For example, a manufacturing plant with a lot of lifting and heavy equipment use will have a higher premium than a small professional services office. (This is why proper classification of employees is critical to receiving an accurate quote and paying for the proper coverage.)
  • Business size: Workers’ comp premiums are calculated based on payroll. The larger the payroll, the higher the premium. This is why small businesses often pay lower premiums than large ones.
  • Claims history: Like any insurance policy, filing claims can drive up premiums. In the case of workers' compensation, a claims history helps insurance companies gauge the safety of that workplace and the likelihood of future claims.

All of these factors influence the final premium for the policy. But a major factor is the workers' compensation rate — which is set by the state. Move the exact same plumbing company from Florida to Georgia, and premiums go up dramatically because Georgia's rate is higher than Florida's rate.

So, why is that?

Why Costs Differ Between States

Workers’ compensation costs differ between states based on four factors:

  • Workers’ compensation classification codes
  • Workers’ compensation claims
  • Workers' compensation care
  • Workers’ compensation laws and disputes

We get into each below.

Workers' Compensation Classification Codes

Rates are based in part on the likelihood of a work-related injury or illness. Roofers are more likely to get injured than accountants. States with large trucking, logging or manufacturing industries are more likely to have higher injury rates, higher claims, and therefore, higher costs.

To offset these costs, the state may set higher rates than states with a larger share of office or professional service-based businesses.

Workers' Compensation Claims

Relatedly, states often raise or lower rates based on changes in workers' compensation claim filings. This includes:

  • The net number of claims filed
  • The cost of claims filed

Improvements in anything from workplace safety measures to more cost efficient medical care can bring down state-wide workers' comp rates.

Workers' Compensation Care

A workers' compensation policy provides a number of benefits to the employee, which can range from:

  • Medical treatment
  • Rehabilitation costs
  • Compensation for lost wages

Because of this, work comp rates are often tied to the overall cost of living. States with higher cost of living — higher wages, more expensive medical care, etc. — tend to pay higher work comp rates.

Workers' Compensation Laws & Disputes

The state’s legal precedent toward businesses and workers can also affect costs. The state workers' compensation system controls which workers need to be covered by a work comp policy, and court rulings decide disputes between businesses and injured workers.

In general, in more worker-friendly states:

  • There can be stricter requirements for coverage.
  • Disputes are more often decided in favor of the worker.

This means more workers have the protection and benefits of workers' compensation, but it can increase costs within the state workers' compensation system. This is then offset by rates. The opposite is often true in more business-friendly states.

Get Your Workers’ Compensation Price

Rather than shop on your own — either online or over the phone — it’s more efficient to do so through an agency. At WorkCompOne, we make it simple to get quotes from well-known workers’ comp insurance companies such as Travelers, Coterie, Liberty Mutual Insurance and The Hartford.

All you need to get started are basic details about your business, employees and payroll. From there, you can request and compare quotes with the goal of buying an affordable policy that meets your state’s requirements.


Tags: workers compensation, workers compensation insurance cost, workers compensation insurance