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Compare workers’ compensation insurance
Discover when you need insurance for your employees and what features to compare.
Workers’ compensation is mandatory in most states and for most companies to protect businesses and employees, and you only need a few employees to require it. In addition, some states allow you to choose between state and private insurance companies, while others mandate going through the state. In states where you can choose, consider companies with ongoing assistance and resources to help you meet your legal obligations.
What's in this guide?
- What is workers' compensation insurance?
- Compare business insurance
- What does workers' compensation cover?
- What isn't covered by workers' compensation insurance?
- When is workers' compensation required?
- How much does workers' compensation insurance cost?
- How do I compare policies?
- Does workers' comp cover employees in other states?
- Frequently asked questions about workers' compensation
What is workers’ compensation insurance?
Workers’ compensation pays for employee injuries or illness related to their work, and that sometimes includes lost wage or death benefits. It also protects businesses since employees typically can’t sue for injuries when accepting workers’ compensation benefits.
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What does workers’ compensation cover?
This policy doesn’t just protect direct injuries like falling at work. Other situations it may cover, depending on state laws:
- Injuries on the job
- Stress-related injuries if the job was a main contributing factor
- Occupational illnesses from workplace hazards like chemicals
- Business travel including deliveries, sales calls or meetings
- Business events like company parties or outings
- Natural disasters or terrorism while employees are working
- Lost income based on a percentage of the employee’s or state’s average wages up to a maximum amount or number of weeks
- Death benefits for dependent family members for a percentage of the employee’s wages and some funeral benefits
What isn’t covered by workers’ compensation insurance?
Employers aren’t required to pay workers’ compensation benefits in every accident scenario. Exclusions may depend on the exact situation and state but can include:
- Injuries that happen away from work. Injuries or illnesses unrelated to work aren’t eligible for workers’ compensation.
- Injuries during break times. In most cases, employees can’t file for injuries that happen on a scheduled lunch break. However, working lunches or lunches at the company’s cafeteria may get coverage.
- Employee misconduct or criminal acts. If employees get injured while under drug or alcohol influence, violating company policy or committing a serious crime, benefits probably won’t get paid. But exceptions could apply if managers knew about or condoned the behavior or if employees commonly or unknowingly violated a policy.
- Undisclosed pre-existing conditions. Workers can’t file for pre-existing conditions in most cases, especially if they lied about the condition when asked before starting work.
- Self-inflicted injuries. Deliberate injuries that an employee causes won’t get coverage.
- Psychological injuries from reasonable employer actions. Employees can’t file for pain and suffering if you fire, demote, promote, discipline or restructure within your business for reasonable causes.
When is workers’ compensation required?
Most businesses require workers’ compensation insurance if they have multiple employees, unless the size or type of business receives a specific state exemption. Each state sets its own criteria for businesses. However, a few types of businesses or employees may get exempt from coverage:
- Small businesses. Most states require businesses to carry workers’ compensation if they have a certain number of employees, such as three or five.
- Sole proprietors and partnerships. These businesses aren’t required to buy policies until they hire employees. Partners are considered owners of the partnership and don’t count toward the employee number.
- Specific industries. Some states exempt certain industries like agriculture, domestic home services or railroad businesses.
- Contractors. These workers may or may not require workers’ compensation, depending on the state. A principal contractor who employs subcontractors will usually need to cover them, but a single contractor working alone may not require it. However, some companies require contractors to hold their own policies before working together.
- Casual workers. In some states, employers don’t have to cover casual workers whose schedules and jobs don’t involve formal requirements and hours. An example may include seasonal door greeters who can come and go on their own schedule.
- Commission workers. Some states exempt businesses from covering employees paid solely on commission.
- Immediate family to business owner. A few states exempt businesses where the owner’s spouse, parents or children work if it influences whether the business needs any workers’ compensation.
- Volunteers. In some states, those performing volunteer work for a charity or religious organization don’t require coverage.
- Self-insured businesses. Companies may need to have specific resources and scale to provide compensation and manage recovery for their own workers.
When can I skip paying for workers’ comp?
You can choose to self-insure if your company meet certain revenue criteria. . However, you could still be held liable for injuries, even if your state doesn’t require you to get workers comp. So it might be a good idea to get workers’ compensation even if it’s not required.
How much does workers’ compensation insurance cost?
The average rate is $1.85 per $100 in payroll. So for a company paying $500,000 in salaries, workers’ comp would be about $9,250.
Your premium depends on several factors, especially the industry you work in and employee wages. Each state sets rates based on different industry classification codes, and high-risk industries like construction may see higher rates. Then, insurance companies multiply the rate for that industry code by the payroll amount per $100.
You’ll need to declare annual wages before your insurance company can calculate the premium. Also, large companies may get an additional experience rating (MOD) that modifies the premium based on its claims history compared to similar companies.
Examples of determining a workers’ compensation premium:
|Industry rate||Payroll (per $100 in wages)||Claims modifier (MOD)||Annual premium|
What factors affect the cost of workers’ comp?
You can’t control every factor related to your premium, but you could save money if you have high workplace safety. Factors that affect cost:
- Total employee payroll. The more you pay your workers in total, the higher your premiums.
- Your industry. States assign higher rates to risky industries like construction or logging.
- Previous claims. If your business qualifies for experience rating, a higher number of claims than other businesses in your industry could increase your premium. You’ll be assigned a modifier above or below 1.00, which represents the average number of claims.
- Location. Companies also look at your business’s risk of catastrophes and natural disasters, raising the premium for dangerous locations.
How do I compare policies?
Your state may let you choose a workers’ compensation policy through state-run and private companies. However, some areas require you to purchase a state policy without comparing other options.
You may want to think of your insurance company as a business partner that helps your business run without legal hiccups. A company with many resources and professional services can help you meet requirements in the best way for your business.
If you can choose your own insurance, look for companies that offer:
- Professional advice. Your insurance company should help you understand your options and make the best choices. You should feel comfortable asking questions about your coverage, safety risks or costs.
- Legal assistance. Your company should be your trusted source for meeting legal requirements in your state. Find an insurer who can walk you through these obligations and send you necessary paperwork. Also, check if your company offers legal assistance when an employee makes a claim.
- Updates. Look into tools your company may provide to update you on workers’ compensation laws or recommended coverage.
- Dedicated claims assistance. Your insurance company should have professionals dedicated to working on your employees claims, so they can start recovery.
- Risk management. Many insurance companies offer programs to assist you in improving your workplace safety, reducing costs and workplace injuries.
Does workers’ comp cover employees in other states?
Yes. Your employees can get coverage if they traveling for work, work remotely or carry out business in a different state. However, you’ll need to name the states where your employees work on your policy, whether they work there on occasion or on a regular basis.
Employees can also file a claim in the state with the most generous workers’ compensation policy, whether it’s in your company’s state, the state where the accident happened or the state where the employee lives.
Frequently asked questions about workers’ compensation
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