Since 1912, when Michigan adopted the Workers' Disability Compensation Act, most employers in the “Mitten State” have been required to carry workers’ compensation insurance.
Workers’ compensation insurance is designed to provide individuals injured at work or those who become ill on the job with wage replacement, medical care and rehabilitation benefits. Furthermore, the coverage limits the liability of the employer in the event of a workplace accident.
Michigan has some of the most strict workers’ compensation laws in the United States, with nearly all companies required to cover their employees. A business must have coverage if one or more of the following applies:
According to one nationwide comparison, Michigan has some of the lowest rates in the country, averaging under $1.50 per $100 in payroll.
The cost of a workers’ compensation policy depends in part on an assigned rate for your business. The Compensation Advisory Organization of Michigan acts as the state’s rating bureau, and determines the advisory rate for each classification code.
Every occupation is assigned a four-digit classification code based on the type of work performed. Insurance companies then establish a base rate for each classification determined by the risk associated with it.
For example, a clothing retail store (class code 8008) might pay $0.78 per $100 in payroll, while a residential carpenter (class code 5645) might pay $1.99 per $100 in payroll. Rates are based on the relative risk of injury and the historical data of filed workers’ compensation claims, and carpentry is generally more dangerous than working in retail.
Here’s a basic example of how a workers’ compensation premium is calculated:
Tip: If a company has employees in more than one classification, these are combined to determine the total premium.
You can learn even more about how rates are calculated in our blog post, Workers’ Compensation Insurance Rates: What They Are & How They’re Set.
Purchasing workers’ compensation insurance in Michigan can be done in one of three ways:
Most small businesses must secure workers’ compensation coverage through a private insurer.
If you need more help or you’re ready to purchase a policy, start your quote today. WorkCompOne provides competitive, no-obligation quotes to small businesses, and can help you navigate your options for coverage.