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How Much does Workers’ Compensation Insurance Cost?

The cost of a Workers’ Compensation policy depends on several factors. This could be where your business is located, how many employees you have, or whether your business is considered high-risk for injury. Because Workers’ Comp laws vary from state to state, businesses may pay more or less depending on their location in the US. Workers’ Compensation policies in Texas, for example, are $.57 per $100 of covered payroll range–some of the cheapest rates in the country. Your business’s net profit, payroll, and prior claims history will also be taken into account when getting a quote for Workers’ Comp coverage. High-risk businesses such as construction and contracting typically have more expensive coverage, while low-risk industries like office and computer jobs tend to have much lower rates. 

The Formula to Calculate the Cost of Workers Compensation Insurance

Calculating the costs of Workers’ Comp insurance may seem confusing at first glance, but there’s actually a relatively simple formula used to calculate Workers’ Compensation cost for a business. This is expressed by the formula below:

  • Formula: Classification rate x Experience modification rate x (Payroll / 100) = Premium

While you probably won’t need to know this exact formula, it always helps to be knowledgeable about the process, and how insurance companies calculate their quotes and rates.  

The only way to know exactly how much Workers’ Compensation Insurance costs your business is to get a quote for your business. Small businesses tend to pay less, with employers paying a medium premium of $560 per year, or around $50 per month per full-time employee. The average cost of a Workers’ Comp claim is $40,000, meaning you’ll be saving quite a bit of money if you have an insurance policy that adequately covers the injury or damages. Most small business owners pay between $400-800 per year per full-time employee. Even if your rates are slightly higher, you’ll still be grateful you had Workers’ Comp coverage in the long run if you ever have an unfortunate workplace injury to one of your employees. 

How Much does Workers Compensation Insurance Cost by States?

According to the Oregon Department of Consumer and Business Services, the national median rate for workers’ compensation currently stands at $1.70 per $100 in employee wages, the lowest it’s been since 1986.

In the US, there are 38 states with rates below $2 per $100 in employee wages. The states with the five lowest rates are: Utah, North Dakota, Indiana, Arkansas, and West Virginia. The rates for those states are listed below.

The Lowest Workers’ Compensation Insurance Cost by States:

  • North Dakota: $0.82
  • Indiana: $0.87
  • Arkansas: $0.90
  • West Virginia: $1.01
  • Utah: $1.06

North Dakota was the state with the lowest workers’ comp insurance rate in 2018, meaning if you live there, you’ll be able to get coverage for a lot cheaper than if you lived in, say, New York.  

The states with higher rates tend to have stricter laws and more at-risk jobs. In New York state, the rate an injured worker can be paid after a claim has steadily risen, doubling in the past 20 years. These rates are based on several factors, including new legislation, business lobbies, insurance providers, and unions on workers’ compensation benefits.

As of 2018 New York has the highest Workers’ Comp rate in the US, at more than $3 per $100 in employee wages. Close runners-up are California, New Jersey, Alaska, and Delaware.

>>MORE: What are Workers Compensation Insurance Requirements by States?

The Highest Workers’ Compensation Insurance Cost by States:

  • New York: $3.08
  • California: $2.87
  • New Jersey: $2.84
  • Alaska: $2.51
  • Delaware: $2.50

Even if you live in a state like New York or California, don’t worry. You should still be able to get affordable Workers’ Compensation coverage. In fact, the median rates of Workers’ Comp coverage have been trending down in the last ten years, so policies are cheaper than ever. Below you’ll see the list that illustrates this trend:

Median rates (per $100 of payroll) for the previous five years:

  • 2018: $1.70
  • 2016: $1.85
  • 2014: $1.85
  • 2012: $1.58
  • 2010: $2.04
  • 2008: $2.26

As you can see, the median rate for Workers’ compensation in the United States is cheaper than it was ten years ago.

>>MORE: How to Find Cheap Workers Compensation Insurance?

Final Thoughts

Even though your Workers’ Compensation rates are based on a number of different factors, you should be able to find a policy that works for you. A good coverage policy will take into account the size of your business, the location, if it’s at a high risk for injuries, and other considerations to determine the price. Fortunately, it’s easy to compare quotes online and find a provider that suits your small business. Read further to see how you can compare and contrast different insurance carriers to find the best possible rate.

>>MORE: Best 7 Workers Compensation Insurance Companies for Small Businesses

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