Workers’ comp insurance costs vary wildly—anywhere from $30 to over $300 monthly. The average small business shells out about $45 per month, though some pay double that. Industry matters. A lot. Construction companies face median costs of $341 monthly while real estate businesses get off easy at just $21. Geography plays a role too, with Texas averaging $576 annually and Rhode Island hitting $1,721. Payroll size, claims history, and employee count all factor into the final bill—and there’s more to unpack.
Design Highlights
- Small businesses pay an average of $45 monthly or $540 annually for workers’ compensation insurance.
- Industry type significantly impacts costs, with construction averaging $341 monthly and real estate only $21 monthly.
- Annual payroll size directly affects premiums, ranging from $668 for under $50,000 to $4,694 for over $1 million.
- Geographic location matters: Texas averages $576 yearly while Rhode Island averages $1,721 annually.
- Average claim costs reach $44,179, with car crashes and head injuries exceeding $91,000 per claim.
Workers’ compensation insurance doesn’t come with a one-size-fits-all price tag, and that’s putting it mildly. The average small business shells out around $45 monthly, or $540 annually. Sounds reasonable enough. But that figure masks a bewildering range of costs that depend on what business owners do, where they operate, and how much they pay their employees.
Workers’ comp costs defy simple averages—your actual price depends entirely on your industry, location, and payroll size.
Small businesses insured by The Hartford pay closer to $1,028 per year, nearly double that baseline average. About 23% of Insureon’s customers get away with less than $30 monthly, while 40% land somewhere between $30 and $60. Self-employed folks and independent contractors typically hit that $45 monthly mark, matching the overall average.
Industry matters. Construction businesses face median monthly costs of $341, translating to $4,101 annually. That’s not surprising considering the inherent risks of the trade. Hotels and motels pay a median of $132 monthly, or $1,586 per year. Real estate businesses catch a break with the lowest median at just $21 monthly, averaging $255 annually. Transportation and warehousing clock in at $275 monthly, or $3,300 annually.
Payroll drives premiums in predictable ways. Businesses with payroll of $50,000 or less pay average yearly premiums of $668.21. That climbs to $813.63 for payroll between $50,000 and $100,000. Between $100,000 and $150,000, premiums average $1,040.34. The $150,000 to $300,000 bracket averages $1,361.96. Businesses with payroll exceeding $1 million fork over an average of $4,693.88 yearly.
Geography creates wild disparities. Texas boasts the lowest average issued premium at $576 per year. West Virginia comes close at $557 annually. Rhode Island claims the dubious honor of highest average at $1,721 yearly. California averages $1,600, while Colorado sits at $759. Alabama tops monthly costs at $119. Different state regulations influence both coverage requirements and the final costs businesses face.
The insurance pays for actual claims, and those aren’t cheap. The average cost for all claims combined from 2021-2022 accidents hit $44,179. Car crash claims average $91,433 per claim. Head and central nervous system injuries average $91,844, the highest by body part. Multiple body part injuries average $71,645. Neck injuries come in at $68,021 per claim. These costs reflect the insurance’s coverage of medical care, wage replacement, rehabilitation expenses, and other benefits mandated by state law.
Rising healthcare costs and medical inflation are expected to push claim severity and workers’ compensation expenses higher in 2025. Claims history, employee count, and business classification all factor into premium calculations. Larger companies often benefit from bulk discounts that can significantly reduce their per-employee costs.
The bottom line? Workers’ comp costs vary wildly based on variables mostly beyond anyone’s immediate control.
Frequently Asked Questions
What Happens if I Don’t Carry Workers’ Comp Insurance When Required?
Skipping required workers’ comp insurance? Bad move.
Business owners face criminal charges—up to 18 months in jail in some states. New York treats it as a felony if you’ve got more than five employees.
Fines run anywhere from $5,000 to $50,000, sometimes higher for repeat offenders. States can shut down operations until coverage kicks in.
And here’s the kicker: injured workers can sue directly for everything—medical bills, lost wages, pain and suffering.
The “exclusive remedy” protection? Gone.
Can Employees Sue if They Receive Workers’ Comp Benefits?
Generally, no. Employees who accept workers’ comp benefits can’t sue their employer for workplace injuries—that’s the “exclusive remedy” rule. It prevents double-dipping.
But there are exceptions. If an employer intentionally caused harm, lacked required insurance, or violated federal safety regulations, lawsuits might be possible.
Employees can also sue third parties like equipment manufacturers while collecting workers’ comp. The system trades lawsuit rights for guaranteed, no-fault benefits.
Pretty straightforward trade-off.
How Often Do Workers’ Comp Premium Rates Change?
Workers’ comp premium rates typically change once a year. Most states review and adjust rates annually, usually at the start of the calendar year.
The National Council on Compensation Insurance files rate changes in the fourth quarter for the next year. But mid-year adjustments happen too—especially when market conditions shift or new laws kick in.
Some states allow more frequent filings if claim trends or economic conditions change considerably. It’s not set in stone.
Are Independent Contractors Covered Under Workers’ Comp Policies?
Independent contractors usually aren’t covered under workers’ comp policies—unless state law says otherwise.
Some states like Louisiana and Florida require it for specific industries, particularly construction. Others let contractors voluntarily elect coverage.
Here’s the catch: many companies demand contractors carry their own workers’ comp insurance anyway, especially for high-risk work.
Misclassify a worker as an independent contractor when they’re really an employee? That’s when penalties hit hard.
State rules vary wildly, so checking local requirements matters.
Does Workers’ Comp Cover Mental Health or Stress-Related Claims?
Workers’ comp coverage for mental health claims? It’s complicated.
As of January 2024, 31 states plus D.C. allow claims without physical injury. That’s the good news.
The bad? Seven states explicitly exclude mental health conditions altogether.
Most states recognize anxiety, stress, depression, and PTSD—if you can prove work caused it.
First responders get special presumptions for PTSD in many states.
But proving causation remains a nightmare, and finding qualified providers? Even harder.
