Workers’ Compensation Insurance Cost

What Is Workers’ Compensation Insurance?

Workers’ compensation insurance provides benefits to employees who suffer a work-related injury or illness. This can include covering medical bills, lost wages during recovery, and rehabilitation costs. In most states, businesses with employees are required by law to have this coverage. It not only protects your team but also shields your business from potentially costly lawsuits related to workplace incidents.

Workers’ Comp

A one-minute explanation

Find out what workers’ comp covers, why you might need it, and how we can help – all in just 60 seconds.

How Much Does Workers’ Comp Cost?

The median cost for workers’ compensation insurance is $92 per month, or about $1,104 per year. However, your final premium will depend on your industry, location, payroll size, and claims history. While most of our customers pay under $150 per month, the price is tailored to your specific business.

Here’s a snapshot of what our customers typically pay for workers’ comp insurance:¹

¹Data from Simply Business customers who purchased a WC policy from July 1st, 2024 to December 31st, 2024.

Your monthly premium will depend on a few key things, including: your industry, location, number of employees, and how much coverage you choose. But most small businesses will pay less than $150 per month.

Which trade has the highest premiums?

Your industry plays a significant role in determining your insurance rate. Higher-risk professions like carpentry often have higher premiums due to the increased chance of injury. Lower-risk jobs, such as software development, typically have lower costs.

_{²Data from Simply Business customers in the identified trades who purchased a WC policy from July 1st, 2024 to December 31st, 2024.}

These numbers are based on real policies purchased through our site. But getting a great policy isn’t just about the numbers — it’s about working with a partner that understands your business. And because we work with a range of trusted insurers, you’ll see options to match your business, so you can choose a policy that works for you and your budget.

Which location has the highest premiums?

The cost of workers’ comp insurance varies significantly by state. Each state sets its own rules and base rates, which can impact your final premium.

³Data from Simply Business customers in the identified States who purchased a WC policy from July 1st, 2024 to December 31st, 2024.

How is the cost of workers’ compensation insurance calculated?

Workers’ comp premiums are determined by a standard formula that considers your industry’s risk level, your business’ claims history, and your payroll.

Three factors go into determining a workers’ comp premium. 

1. Classification codes: These are assigned by insurance companies or state rating bureaus to categorize businesses by risk level, based on their industry and the nature of their work. For example, construction work typically has more risks than photography, so it will have a higher classification rate.

2. Experience modifier (X-Mod): This is based on the number of claims your business has had compared to other businesses with the same classification. Businesses with a workers’ comp history of less than four years typically have an X-Mod of 1.0. An X-Mod above 1.0 indicates more claims or losses than average, potentially resulting in higher premiums.

3. Payroll: This is what you paid to employees, including wages, salaries, and benefits. The premium is often calculated using a percentage payroll. 

How the calculation works.

Let’s say you have a new HVAC business in Florida with a payroll of $75,000. The classification rate is 4.36 per $100 of payroll and your X-Mod is 1.0. 

Your premium calculation would be ($75,000/100)  x 4.36 x 1.00 = $3,270.

What affects the cost of workers’ compensation insurance?

Several key factors determine your final workers’ compensation insurance cost.

Your industry

The type of work your employees do is a primary cost driver. Industries with a high risk of injury, like construction, will have higher rates than office-based professions.

Your location

Each state has its own workers’ compensation laws and rate-setting bureaus. This means that your premium can vary significantly depending on where your employees work.

The size of your business

The number of employees you have is a direct factor in your premium calculation, as more employees generally mean a greater chance of a workplace incident.

Your payroll

Workers’ comp premiums are often calculated as a percentage of your total payroll — the higher your payroll, the higher your premiums:

⁴Data from Simply Business customers with the identified annual payrolls who purchased a WC policy from July 1st, 2024 to December 31st, 2024.

Your policy limits

Higher coverage usually means a higher premium. But it also means more protection if something goes wrong. 

And don’t forget the deductible — that’s what you pay out of pocket before the insurance kicks in. In many states, employers can choose to participate in workers’ compensation deductible programs, where they agree to cover a portion of each claim in exchange for a reduced premium. For more information, consult with a legal professional in your state or with one of our licensed agents on the phone.

Your claims history

If you’ve had past claims, that might bump up your rate. A safe track record can lead to discounts.

Your experience

Have you been in business for years with no claims? That could work in your favor.

Highly rated insurers handpicked for small businesses