Workers’ Compensation Insurance
The policy that responds when somebody who works for you gets hurt doing it. In most states you are required to carry it from your first employee, and it is the one coverage on this site that is usually the law rather than a contract term.
This page is general information, not insurance advice, and it does not change any policy. Coverage varies by carrier, policy form, and state. See our disclaimer.
What workers’ compensation is generally intended to cover
Medical treatment for the injury
Generally intended to pay the medical costs of an injury or illness arising out of the work, without the employee having to prove anyone was at fault.
Lost wages while they recover
Wage replacement at a percentage set by state law, usually starting after a short waiting period.
Ongoing disability
Benefits where an injury leaves a lasting partial or total disability, on a schedule the state defines.
Employer’s liability
The second half of the policy. Generally intended to respond when an injured worker or their family sues you over the injury rather than simply taking the benefits.
Death benefits
Payments to dependants after a fatal workplace accident, again on a state schedule.
What it does not cover
Workers’ compensation is narrow by design. It handles your own people, and almost nothing else.
Injuries to customers or the public
Somebody who is not your employee tripping on your premises is a third-party claim, not a workers’ compensation one.
general liability→Damage to property
Neither yours nor anyone else’s property is part of this policy.
commercial property→Mistakes in the work itself
A claim that your professional work cost a client money has nothing to do with employee injury.
professional liability→Employees driving on business
The vehicle side of a road accident is commercial auto. Workers’ compensation still handles the employee’s own injuries.
commercial auto→True independent contractors
Genuinely independent contractors carry their own. Be careful here, because states test the relationship rather than the label, and a misclassified worker is treated as an employee after the fact.
general liability→When you are required to carry it
Unlike most business coverage, this one is usually driven by statute rather than by a contract. Requirements vary by state, so confirm for yours.
- Most states require it once you have your first employee, some from the third or fifth
- Officers and owners are often excluded by default but can usually elect to be covered
- A general contractor will require it before adding you to a job, and will collect certificates from every sub
- A client or landlord may require it by contract even where your state would not
- Some states run their own monopolistic fund, so the policy must be bought there rather than from a private carrier
Just hired your first employee?
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Get a quoteWhat drives the price
Workers’ compensation is rated more mechanically than most coverage, which makes it easier to see what moves it.
Your class code
Every job is mapped to a classification with its own rate. A roofer and a receptionist at the same company are rated separately and very differently.
Payroll
The premium is calculated per hundred dollars of payroll in each class code, so payroll is the base the whole rate is built on.
Your state
Rates, benefit levels and rules are set state by state, which is why the same business can cost quite different amounts across a state line.
Experience modification
Once you are large enough to qualify, your own claim history produces a modifier that multiplies the rate up or down.
Claim history and safety record
Frequency matters as much as severity. Several small claims often look worse to an underwriter than one large one.
Return-to-work and safety programs
A documented safety program and a light-duty return-to-work plan both help, because they shorten claims.
Frequently asked questions
What is workers’ compensation insurance?
It is the coverage that pays medical costs and a portion of lost wages when an employee is injured or made ill by their work, generally without either side having to prove fault. It also includes employer’s liability, which responds when an injured worker sues rather than accepting benefits. Benefits and rules are set by each state.
Do I need it if I have no employees?
Often no, if you genuinely work alone. But the answer turns on how your state defines an employee, and some states count certain contractors, family members or officers. General contractors also frequently require a policy from solo subcontractors regardless of state law, so check the contract as well as the statute.
Are owners and officers covered?
In most states owners, partners and officers are excluded by default and may elect to be included, or are included by default and may elect out. Which way round it works depends on the state and the entity type. Decide deliberately rather than letting the default happen to you.
What is an experience modification factor?
Once your payroll is large enough to qualify, your own claim history over roughly three years is compared with what would be expected for your class. The result is a factor that multiplies your premium. Below one reduces it, above one increases it.
Does it cover independent contractors?
Genuine independent contractors should carry their own policy, and you should collect a certificate. Be careful, because states apply their own tests to the relationship. If a worker is later found to be an employee, they are generally treated as one from the start, and uninsured payroll usually shows up at audit.
What is a premium audit?
Workers’ compensation premium is estimated on projected payroll and then trued up after the term against actual payroll and class codes. If payroll came in higher than estimated, or work fell into a different class, the audit produces an additional bill.
How much does workers’ compensation cost?
It depends on your class codes, your payroll in each, your state, and your claim history, so no single figure applies across businesses. The fastest way to find out for your own situation is to request a quote.
Other coverages: general liability, professional liability, business owner’s policy, commercial auto.
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