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Workers' Compensation Insurance Cost: What Trade Contractors Need to Know

buying workers compensation
  |   4 minute read

trades contractors workers compensationAs a small business owner, trade contractor or general contractor, you know workers’ compensation insurance affects your bottom line and your ability to step onto the jobsite.

What you may not realize is that there are special nuances, exceptions and considerations specific to trades and contractors. 

How Much Is Workers’ Comp Insurance for Trades?

To manage your workers’ compensation costs, not only do you need to understand the finer details of workers’ compensation insurance for trade contractors, but you must also have a plan in place to secure a competitive rate.

Here are three tips to help you make an informed purchase:

1. Calculate Your Payroll Correctly ☑️

Generally, employees must be covered by a workers’ compensation policy; independent contractors do not.

However, trades and contractors are often the exception to this rule. Workers’ compensation compliance is dictated by state law, and most risk-averse fields may need to provide (or provide proof of) coverage even for subcontractors. 

How to protect your company from trouble:

  • Know the difference between an employee and contractor. First, you need to know which workers fall under which category. It’s possible (and probable) that you have both types working for you. Misclassification of employees as independent contractors is a common mistake that can cost you money over the long run.

    Remember, you don’t get to choose. If a contested claim ends up in court, a judge will make the final determination as to whether or not the worker is an employee. It’s best to do your legwork up front.

  • Check your state’s laws. How does your state handle subcontractors? Does your industry have specific rules? Double-check your state work comp laws and how they may impact you. Any state(s) where you may be performing work would apply. 

  • Require subcontractors to provide proof of workers’ compensation insurance. If you don’t do so upon hiring a subcontractor, you could be on the hook for paying their coverage at the end of your policy period. Make this standard procedure so you aren’t left holding the bag. 

💡 Once you know which is which, our blog post will walk you through calculating payroll accurately: How to Calculate Payroll to Find Your Workers’ Compensation Cost.

2. Select Your Classification Code Based on What You *Typically* Do 🛠️

You might consider yourself a general contractor or handyman, because you have a wide range of skills. But you probably don’t operate as a handyman — and that’s where trouble can set in. 

This is a common misconception particularly within the skilled trades. For example, if you primarily do plumbing work, but could also step in when a customer needs drywall repairs, you may classify yourself as a general contractor or handyman when getting a workers’ compensation quote. 

But from an insurance company’s perspective, you’re a skilled tradesperson that does plumbing.

Here’s why this is important:

  • Classifying yourself as a general contractor will result in you choosing the wrong class code.
  • Most insurance carriers don’t want to cover handymen, as they are exposed to an overabundance of risk, which underwriters find difficult to assess and therefore tend to decline to offer a quote.

In order to get the most accurate coverage and quote, select the class code and/or service that best fits the work you’ve done over the past 12 months. Focus on what you actually do, not what you could do. 

Examples of trade industries and their class codes include:

  • Carpentry (5403) 
  • HVAC (5537)
  • Janitorial services (9014) 
  • Landscaping (0042) 
  • Plumbing (5183)

3. Remember Work Comp Non-Compliance Is Costly, Too 💸

You think you can get by without carrying a workers’ compensation insurance policy. You put it off until the last minute, when you need to provide proof of insurance to bid on a job. 

It’s likely that you’re doing this for one simple reason: to save time and money.

While you may save money in the interim, if your non-compliance catches up to you it can result in:

  • Fees and fines
  • Damages
  • Medical costs
  • Criminal charges

The penalties for non-compliance vary from state to state, but they’re costly.

Get a Free, Online Quote with WorkCompOne

When you want to get the best deal but don’t know where to start, it’s best to consult with an online independent agency. 

Since trade policies are more expensive than traditional workers’ compensation policies, it’s critical to lean on an agency that can shop around for the most comprehensive and affordable policy on your behalf. 

At WorkCompOne, we can secure fast quotes, allowing you to get the coverage you need without delay.


Tags: buying workers compensation