Workers Compensation Insurance Cost: Average Rates & What Drives Them

Workers' compensation insurance pays medical bills and part of the lost wages when an employee is hurt or becomes ill because of work. Most states require employers to carry it once they have employees, though the thresholds and exceptions differ by state. Unlike many business policies, the premium is calculated from your payroll and the type of work your employees do, so two businesses of the same size can pay very different amounts.

This guide explains how the premium is built, then shows published averages by state, by industry, and by source. The requirement for your business depends on your state, so a licensed insurance agent or broker is the right person to confirm it.

Insurers apply a rate per 100 dollars of payroll, set by the job classification of your employees. The basic formula is the classification rate times your experience modification rating times annual payroll divided by 100. The experience modification rating, or EMR, reflects your claims history compared with similar businesses. Many states base their rates on guidance from the National Council on Compensation Insurance, and a few states run their own systems.

This is why payroll, industry, and claims history matter more than the number of employees alone. An office worker and a roofer on the same payroll carry very different injury risks, and the classification rate reflects that.

State law, benefit levels, and the local system all change what employers pay. These figures are monthly averages for Insureon customers.

Texas is the lowest in this group, while Florida and California are the highest. State comparisons are rough, because each state's mix of industries and its own rate rules differ.

MoneyGeek reports the monthly premium per employee, which makes industries easier to compare.

Construction sits far above the other industries shown, since the work carries higher injury risk. NerdWallet reports a different measure, the median annual premium of businesses in specific trades, using data from the broker Coverdash.

Both tables show the same pattern: physical, hands-on trades cost the most, and desk-based work costs the least.

Averages from different sources describe different things.

• Insureon reports a median monthly premium for its customers, who are mostly very small businesses.
• The Hartford reports the average for its own customers with limited payroll, so the figure reflects smaller employers.
• MoneyGeek reports a cost per employee, not a cost per policy. A business with several employees multiplies that number.

A per-employee figure and a per-policy figure are not competing answers. They describe the same cost on different bases.

• Job classification. The nature of the work sets the base rate.
• Payroll. The premium is built on payroll, so a larger payroll costs more.
• Claims history. A poor record raises your modification rating, and a clean one lowers it.
• Location. State rules and rate systems differ.
• Workplace safety programs. Insurers may offer credits or discounts where a safety program is in place, depending on the carrier and state.
• Employee count and classification of each role. Office staff and field staff in the same company are often rated separately.

Workers' comp premiums are usually estimated at the start of the policy and then reconciled by an audit after it ends. If actual payroll or the mix of job classifications differs from your estimate, you may owe an additional premium or receive a refund. Keeping payroll records and classifying employees correctly avoids surprises.

• Which classification codes is each employee assigned to?
• What payroll figure was used?
• Is the quote an estimate subject to audit?
• Does the policy include employer's liability coverage, and at what limits?
• Are there payment plans, and do they carry fees?