Workers’ compensation insurance covers expenses in the event that an employee is injured while at work, either on the premises or while on assignment outside of the company’s premises.
The worker is also entitled to medical coverage and compensation for lost wages when they couldn’t work. They are also eligible for permanent disability benefits if they can no longer perform their old tasks due to injury or illness.
However, workers’ compensation premiums can be prohibitive for small businesses with limited resources. This can be especially challenging considering workers’ compensation is mandatory across virtually all states in the U.S.
Therefore, it is very important for you to understand how workers’ compensation coverage is calculated. We’ve created this guide as your workers compensation insurance cost calculator.
When working out how much you should pay for coverage, insurance companies look at a few aspects discussed below.
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Industry the Company Operates In
The industry in which a company operates will play a key role in determining how much in premiums the company should pay.
That said, workers’ compensation insurance premiums are higher for companies in industries that are more likely to experience work-related injuries and lawsuits. Examples of industries with higher risks of worker injury include mining, construction, and manufacturing.
Number of Employees
The number of employees you have and the type of duties they perform is also factors in calculating workers’ compensation insurance rates.
As you might expect, workers’ compensation insurance premiums are higher for companies with large workforces. Workers’ compensation insurance premiums are also higher for companies that have high employee turnover.
Note that some states regulate how many employees a business can have before being required to purchase workers’ compensation insurance.
The Company’s Location
The location of your business also has an impact on workers’ compensation rates. Businesses that operate in high-risk regions with high rates of lawsuits are charged higher premiums than those that operate in low-risk areas.
Claims History of the Company
Workers’ compensation insurance providers will also look at your company’s claims history when calculating premium rates. The more claims a company has filed. The higher workers’ compensation insurance premiums will be.
Providers will also look at the average amount of money claims that have been settled to calculate how much to charge. The more claims you’ve paid out, the higher your worker’s compensation rates will be.
The Bottom Line
No matter how small your operation, workers’ compensation is critical to operating a business. It is meant to protect businesses from lawsuits by paying for medical expenses and lost wages if a worker suffers an injury or illness while on the job.
However, when calculating the cost of workers’ compensation coverage, insurance companies consider factors such as the number of employees, claims history, and industry the company operates in, as highlighted above.
The good news is there are several ways to save on workers’ compensation insurance, such as only hiring experienced employees, implementing high-level safety measures, and using modern equipment to ensure the safety of your employees. Using this worker’s compensation insurance cost calculator will guide you when choosing your insurance carrier.
