The Average Cost of Workers’ Compensation Insurance

Why is getting an Average Workers’ Comp Insurance Cost impossible?

It all has to do with how the rates are calculated. 

In order to calculate the base rate, the state gathers all of the claims that were paid for each specific industry and sets a base rate. The carriers aren’t trying to rip anyone off. They all have to work from the state’s base rate. 

Keep in mind that the rate can differ from one state to the next. 

Not only that, but the industry will also play a role. Some industries are inherently more dangerous than others are and may have a higher base rate.

Of course, the base rate provided by the state is just the start. 

Additionally, the carriers may add extra charges to the base rate and charge that to their policyholders. 

Every carrier will also have its own rate. This is called their LCM (lost cost multiplier). This gets added to the base rate. 

The carriers can have a different LCM in each state. The carrier will submit this information to the state, and they have different tiers for policies.

Examples of how this works in the real world

Let’s look at some examples from the real world to get a better idea of what this means and how it works and why it’s hard to get an average cost of workers’ comp insurance. 

Check out these compensation rate examples.

Some states are known as rate states. New Jersey and Florida are two such states. 

In Florida, the rate for a landscaper (2023) is $5.83. So, you would divide the gross payroll by 100 and multiply by that rate.

If the payroll is $50,000, then the annual premium would be $2,915. There would also be taxes and fees, which would add about $250 more.

Easy, right?

But take a look now at how much rates can vary.

With one particular carrier, the rate for a Virginia landscaper (0042) is $3.30. 

The rate for clerical work (8810) is $0.15 in Florida and $0.09 in Georgia. 

Look how the rates vary depending on state and industry in the chart below.

Getting confused? Don’t worry, it gets explained below. 

You can’t really Find Average Cost of Workers’ Comp Insurance for several reasons

What sort of information are you able to glean from the above?

• First, you will note that there is a big difference in the rates between the states, even for the same industry.
• Second, you will note that jobs with fewer physical hazards, such as clerical work, will have lower rates than something inherently more dangerous, such as landscaping. 
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  It becomes clearer that calculating the average cost of workers’ compensation insurance is not possible because it is going to vary. Naturally, a business that uses tools and involves manual labor will have a higher rate for workers’ compensation coverage.
• Not only that, even though there might be a rate state that has a base, and they need to stick to the base, insurance carriers can add fees. 
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  In New Jersey, for example, it is possible to add a 25% debit or 25% credit. Credits are essentially a discount on the rate while debits are a percentage of increase on the rate. 
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  Some states might not be rate states, but the underwriter will still have the ability to add a credit or a debit. Pennsylvania is an example of that type of state.
• However, the carriers can offer dividends and rebates. 
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  This means that after the policy is over, a carrier may decide whether they will give back some of the cost either through flat dividends or through claim sensitive dividends. 
  
  Meaning, if you had a good year and didn’t have many or any claims, the insurance company will give back some of your money.

Always Get the Coverage Your Business Needs

Although workers’ compensation coverage might seem expensive and you might feel that you will never need it, don’t make the mistake of trying to skirt the rules. 

You will find that in most states, you are required to have workers’ comp insurance. Even if it weren’t required by the law, it is simply a good idea to have plenty of coverage.

For starters, it will help to ensure that injured workers will get the help they need. Even in a safe work environment, there could be incidents or issues that result in illness or injury to an employee. 

Having coverage ensures that injured employees can be assisted by wage replacement and medical benefits.

Additionally, you will appreciate that the workers’ comp coverage will help to protect your business. It helps your business to avoid paying the full costs of medical expenses and lost wages after an employee has been injured. 

Without this protection, even a single injury to an employee could cause major harm to a company. In the case of some businesses, especially smaller ones, it could cause them to shut down.

Getting Coverage

You will find that the payment plans will vary from one carrier to another. Some of the carriers do not offer pay plans for certain low premiums. 

Some will allow you to pay over 12 months rather than all at once. The options will vary from one carrier to another. 

Ideally, you will want to work with a company that can offer a range of payment plans. This will give you more freedom and flexibility when it comes to paying for the coverage.

What about Workers’ Comp for Small Businesses?

How much does workers’ comp insurance cost for small businesses? 

Small business owners who are wondering what the average premium for their insurance costs will be are going to need to get in touch with insurance companies, as is the case for larger companies. 

They will need to look at the options available through each of the carriers to find a policy that will work for their needs and budget.

Again, you will want to make sure you take the time to find a reputable agent that can provide you with the coverage you need to keep your business operating.

Still trying to figure out what an insurance policy would cost you?

If you’ve made it this far and want to get a better idea of what workers’ compensation insurance would cost for your business, you’re in luck!

We have a short 5-page form that takes less than 10 minutes to fill out and it will generate a personalized quote that is tailored to your business information.