Workers Compensation Insurance Cost

Typical costs:

Regulations and premium costs for workers compensation insurance vary from state to state, but the rates are always calculated at a cost per $100 of an employee's salary based on the risks involved in that type of work. A roofer will be covered at a much higher rate than a retail store clerk or a copy machine operator. In California, an office clerk is covered for roughly $1.25 per $100 of salary. If the clerk earns $575 a week ($29,900 a year), the employer pays workers compensation premiums of $7.19 weekly or $373.75 annually, according to AllBusiness.com. The number of claims a company has in recent years directly affects its premium rates, either increasing them for a poor record or reducing them for effective safety procedures.

What should be included:

This isn't optional: almost without exception if you have one or more employees you must have workers compensation insurance, even for a home-based business. The penalties for not having this required insurance can be stiff.
Workers compensation covers employees with work-related illnesses and those who are injured on the job, whether on the company's premises or elsewhere, including auto accidents while on business. The insurance pays for the employee's medical services, recovery and rehabilitation plus compensation for lost pay due to a work-related illness or injury. It's not a substitute for health insurance, since employees are only covered while on the job. The Insurance Information Institute gives an overview.

Discounts:

To cut costs, be sure your employees are properly classified for the type of work performed; if you have a poor safety record (and therefore higher premiums) create an awareness program and be sure everyone's using proper safety equipment; if your state doesn't require premiums on overtime, be sure it's not included in the payroll figures submitted to calculate your insurance costs; and consider having a deductible amount on the policy, which is possible in about half the states.

Shopping for workers compensation insurance:

WorkersCompensation.com provides rules and regulations by state as well as an online quote service .
Not all insurance agents are up on the latest workers compensation requirements in their area. Check with your agent, but also contact your state insurance department for specific local requirements and a list of registered companies in your area. The National Association of Insurance Commissioners has links to state offices and a way to search for financial details and complaint histories for specific insurance firms.

Article updated November 2006

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