Workers’ Compensation Insurance Costs: How Much Does It Really Cost?
How much does workers’ compensation insurance cost? It might seem like a straightforward question, but there are actually multiple answers to it, depending on your specific situation. Do you have any other kinds of business insurance that overlap with the workers’ comp coverage? Are you in a high-risk industry? How many employees do you have? How old are they? All of these factors will affect the price of your workers’ comp premiums and your overall experience with workers’ comp as an employer.
Average costs across multiple states
According to the National Association of Insurance Commissioners (NAIC), the average cost of workers’ compensation insurance was $1.24 per $100 of payroll in 2018. However, rates can vary significantly from state to state. For example, in California, the average cost was $2.33 per $100 of payroll, while in Ohio it was just $0.65. A few states have enacted laws that mandate certain levels of coverage be maintained and not allow companies to self-insure. These include New York, Washington, and Illinois.
Factors affecting workers compensation insurance rates
There are a few key factors that affect how much your workers compensation insurance will cost. The first is the size of your business. The second is the industry you’re in. The third is your claims history. The fourth is your state’s workers compensation laws. And the fifth is the insurance company you choose. Some companies charge higher rates for certain industries, but this may be worth it if they have a strong reputation for paying claims quickly and efficiently. On the other hand, you can save money by going with an insurer who has lower rates but takes longer to process claims.
Estimating your workers comp cost based on state
In order to calculate your workers’ compensation insurance cost, you’ll need to know which state you’re doing business in. Each state has its own rules and regulations governing workers’ compensation, so the cost will vary depending on where you’re located. Here are the top five ways to estimate your workers’ compensation insurance cost for a company in a specific state:
- Check with the National Council of Compensation Insurance for costs specific to that state.
- Look at the premiums listed by other businesses operating in that same industry and region of that state.
- Check with local agents or brokers who specialize in workers’ compensation rates.
- Consult an independent expert on rates or related subjects such as actuarial science or economics (lawyers, accountants, economists).
Estimating your worker’s comp cost based on industry
Estimating your workers’ compensation insurance cost is one of the top ways to keep your business costs down. By knowing how much it will cost you to insure your employees, you can budget accordingly and save money in the long run. Costs are calculated based on the industry using four factors:
- your state’s rules
- your industry’s rules,
- employee classification requirements by job type (salaried or hourly), and
- whether or not any claims have been filed against the company.
Example of how to estimate the cost of workers comp insurance
There are a few different ways to estimate the cost of workers’ compensation insurance. The most common way is to use a percentage of your payroll. For example, if your business has a total payroll of $100,000 per year, you might expect to pay around $2,000 for workers’ comp insurance. If you have 50 employees with an average salary of $50,000 per year, then your annual salary and benefits costs would be $25 million dollars (or just over 2% of this). If your annual salary and benefits costs were only 2% higher ($27 million), then a 1% increase in Workers Comp insurance would cost about $1 million more each year.
