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How Much Does Workers' Compensation Insurance Cost?

Workers’ compensation insurance cost varies based on business size, location, industry and claims history.

Workers’ compensation insurance protects both employee and employer from risk when a worker is injured on the job. This means that the cost is going to be dictated by the size of your workforce and the type of work employees do.

Unlike other small business policies, workers’ compensation is regulated at the state level, so rates and coverage requirements also differ from state to state. Almost universal, however, is that employers are legally required to carry workers’ compensation insurance that covers all employees on their payroll.

Find Out My Workers Comp Cost - dropdown screenshot

Your work comp quote will be based on four factors:

  • What Do You Do? Your business is evaluated based on the jobs performed and potential risk for physical illness or injury. Workers’ compensation premiums are calculated, in part, by the kinds of work performed. It’s important to classify employees accurately—based on what they spend the majority of their time doing—because this could alter your premium dramatically.
  • Where Do You Live? Workers’ compensation is regulated at the state level, which means rules and rates can vary from state to state. Your business must comply with the states where your employees perform work—not necessarily where the business was founded or is based.
  • What Size Is Your Business? Most states treat part-time and full-time employees the same, and calculate cost based on payroll size.
  • What’s Your Record? Your claims history is used to gauge how safe your workplace is and how likely you are to have future claims. Any claim, big or small, will influence your premium. Conversely, months or years without a claim reflects a safe work environment and can lower your rates.

Average Workers’ Compensation Cost for Small Businesses

For every $100,000 in payroll, the average workers’ compensation policy can range from a few hundred dollars to a few thousand dollars annually.

Your state and the type of work can both dramatically influence what you can expect to pay. For example, here’s how rates compare between Indiana and California, and for a clerical vs. plumbing business. Both are based on $100,000 in payroll.

Average Annual Workers' Comp Insurance Cost
Example of annual workers' compensation insurance policy cost for $100,00 payroll, 2018.


Physically demanding jobs have higher rates than office jobs, but rates can also vary widely by state. This is because workers’ comp covers legal costs as well as medical bills and missed wages, which raises rates in more litigious markets.

To learn more, this article walks you through it step by step: How to Calculate Workers' Compensation Cost Per Employee.

Workers' Compensation Insurance Rates 

Another reason work comp costs can vary so dramatically is the difference in rates. Within each state, rates are set for each industry (called class codes, explained more below). This rate is set per $100 in payroll. For example: A rate of $3.00 means that a business with $100,000 in payroll would pay $3,000 annually in work comp premiums. The rate, however, is just a starting point. Other credits or debits may be applied by the insurance carrier to calculate the final quote. 

Learn more about rates in this blog post: Workers’ Compensation Insurance Rates: What They Are & How They’re Set


How to Estimate Your Workers’ Compensation Costs

When shopping for workers’ compensation insurance, your policy premium is calculated based on your work comp class code, location, payroll and past claims.

For a step-by-step explanation of how to calculate workers' compensation insurance costs, read this post: Workers' Compensation Insurance Cost Calculator: How Much for a Small Business Policy?

icon-what-do-you-doClass Code

Classification code (“class code”) is a numeric code the corresponds to a standardized list of industries, and a way for insurance carriers to categorize companies. These codes are defined by the National Council on Compensation Insurance (NCCI), the independent organization that collects data on U.S. businesses. Through extensive injury and claims data analysis, NCCI provides advisory rates to insurance carriers that reflect the relative risk each industry presents.

Based on the work your employees do, your business is assigned a class code that influences your final premium cost. Each carrier has its own models for evaluating risk and calculating premium cost, but in general more dangerous class codes may be difficult or more expensive to cover (for example, an office vs. a roofing company).

To find out your class code, it’s best to work with an insurance agent that specializes in work comp. They can help you most accurately classify your business, modify your class code as needed, and avoid paying for the wrong classification.


Workers’ compensation is governed at the state level, so requirements, costs and carriers will vary. For workers' compensation insurance rates by state, check the requirements of the state where employees work. If you employ workers in multiple states, talk to an insurance agent about securing policies that comply with each state.

Both your insurance agent and carrier must be licensed in your state. Again, refer to your state’s resources, or find an insurance agency that’s licensed nationwide.


Another factor is the size of your workforce. Most states treat part-time and full-time workers the same. This means cost is actually not determined by the number of employees you have, but on your total payroll.

When buying a policy, use an average of your payroll throughout the year. Even if this fluctuates, you can typically contact your insurance agent to increase or decrease the payroll size, and in doing so adjust your premium amount and level of coverage. Under-reporting payroll can result in unexpected expense when your business is audited and you’re required to make up the difference in premium.

icon-whats-your-recordExperience Mod

Lastly, your experience modification factor (“Experience Mod”) is a credit or debit applied to your premium to factor in your past history of claims. This number, determined by an independent rating bureau (NCCI in most states) based on actuarial data, is mandatory for carriers to include.

While your class code groups your company with similar businesses, your Experience Mod allows you to demonstrate above-average workplace safety—and reap the benefits. Beyond this, individual underwriters may choose to apply their own credits or debits to a quote.

If you’re a new business with no history or prior coverage, you won’t yet have an experience mod, and this can lead to higher premiums. With no prior history to evaluate, work comp costs may be higher your first three years in business.

If you have a history of claims, you can expect to pay more and should consider implementing safety programs to avoid future claims and bring down your cost. Few or no claims, on the other hand, show that you have a safe workplace, and can reduce your annual premium. And safety pays off: Your claims record can commonly influence premiums 10% to 25% in either direction.

Review your Experience Mod annually with your insurance agent to see if you qualify for a reduced premium.

Buy Affordable Workers’ Compensation Coverage

If you need to purchase work comp coverage, you can get a quote from an insurance agent in just a few minutes.

When evaluating your quote, you might look for discounts, such as:

  • Workplace safety programs. A formal, recognized program introduced by the employer will be recognized by most insurance companies. Talk to your insurance agent or carrier to find a program that qualifies.
  • Owner exceptions. In some states, employers can choose to exempt themselves from coverage, which can bring down small business premium.
  • Formal training programs. Many structured safety training programs, such as a 90-day program for new hires, can result in a credit on your policy.
  • Formal safety administrative position. In larger businesses, a Chief Safety Officer or similar role might be necessary and beneficial to control costs.
  • Payment plans. Many carriers offer a variety of payment plans (annual, semi-annual, quarterly). Paying in larger installments won’t affect your premium, but it will reduce billing fees tacked onto each payment. These savings can add up for small businesses.
  • Payroll reporting. An increasing popular option, payroll reporting allows businesses to pay a more exact premium on a monthly basis. Traditional premiums are based on estimated payroll, and the difference is billed or credited after an annual audit. With payroll reporting, the business owner is responsible for reporting the company payroll for that month, and is billed for that amount. For businesses that keep a close eye on cash flow, this can be a good alternative.

Workers’ compensation insurance protects your business legally and financially. By working with an experienced insurance agent, you can get the coverage you need at a fair, affordable price.

Ready to get started? Get a free quote from WorkCompOne in less than 10 minutes.

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