Workers Compensation Insurance

Frequently Asked Questions

How much does workers comp insurance cost?

NCCI: average workers comp cost is $1.19 per $100 of payroll nationally. Low-risk (clerical): $0.10-$0.30. High-risk (roofing, logging, framing): $15-$30+. State-mandated rates vary widely; California and New York are highest.

What does workers comp pay for?

Medical treatment, lost wages (typically 60-67% of average weekly wage), permanent disability benefits, vocational rehab, and death benefits to surviving family. Benefits are statutory - set by each state's workers comp board.

What is the experience modification factor?

Your "ex mod" compares your loss history to similar businesses. 1.0 = average; below 1.0 saves you money; above 1.0 costs more. A 0.85 ex mod cuts premium 15%; a 1.30 raises it 30%. Three years of claim-free experience can drop your mod 10-20%.

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How This Calculator Works

Workers' compensation premiums are built from your payroll, the hazard rate of your NCCI class code, the state you operate in, and your experience modifier - the same four levers your carrier uses. This tool multiplies a per-$100-of-payroll rate by your payroll, scales it for state cost differences, applies your experience mod, then layers on safety credits and large-premium discounts to estimate annual and monthly cost, cost per employee, and your effective rate after all credits.

Formula

The manual premium is the foundation:

Manual Premium = (Payroll ÷ 100) × Rate × State Factor

Net Premium = Manual × Experience Mod × Safety Credit × Premium Discount

Class rates range from $0.18 per $100 for clerical (8810) to $25.00 for logging (2702). State factors run from about 0.55 (Washington) to 1.40 (California). A safety program applies a 0.93 multiplier, and large modified premiums earn discounts (0.96, 0.92, or 0.88). A $750 minimum premium applies.

Worked Example

A restaurant (class 9079, rate $1.95) with $500,000 payroll in California (factor 1.40), an experience mod of 1.00 and no safety program: adjusted rate = 1.95 × 1.40 = $2.73 per $100. Manual premium = (500,000 ÷ 100) × 2.73 = $13,650. Since this exceeds $10,000, a 0.96 discount applies → about $13,100/yr, or roughly $1,092/month. Across, say, 8 employees that is about $1,640 each.

Common Mistakes

Using the wrong class code - misclassification is the single biggest source of overpayment or audit penalties.

Assuming a new business gets a discount - experience mods start at 1.00 until three years of claims history exist.

Ignoring state variation - the same payroll can cost more than 2× in California versus Washington.

Reporting claims late - delays beyond 24 hours can raise claim costs 50% or more and hurt your future mod.

Forgetting the $750 minimum premium that applies even to tiny payrolls.

Tips & FAQ

Q: What does the experience mod mean? It compares your three-year claims history to similar firms. Below 1.00 is a discount, 1.00 is average, and 1.25 means you pay 25% more than manual premium.

Q: Is coverage mandatory? Every state except Texas requires it for non-owner W-2 employees; going bare in Texas exposes you to unlimited tort liability.

Q: How do I lower the premium? Document a safety program, run a return-to-work program, audit class codes, and use pay-as-you-go billing to avoid year-end audit surprises.

Q: What are monopolistic states? North Dakota, Ohio, Washington, and Wyoming require you to buy from the state fund rather than a private carrier.

Workers Compensation Insurance

Frequently Asked Questions

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