Workers' Compensation Insurance

Accidents happen. Protect your business and employees in the event of a workplace injury or illness.

Workers' Compensation for Small Business Owners

What is workers' compensation insurance?

Workers’ compensation insurance is protection for people who get hurt or become ill during the course of their employment. It can be the result of an accident — like hurting their back in a fall or being burned by a hazardous chemical. It can also be the result of repeated exposure to something harmful during work, like losing hearing due to persistent loud noises or rotator cuff damage from performing the same arm motion over and over.

Workers’ compensation insurance offers five basic benefits:

  • Medical care for the injured worker.
  • Temporary disability benefits to make up for lost wages while the injured employee is recovering.
  • Permanent disability benefits if an employee can’t return to work.
  • Supplemental job displacement benefits, which pay for skill enhancement or retraining if the injured worker can’t return to the job they had before the injury.
  • Death benefits paid to a spouse, children or dependents if the worker dies as a result of job-related injury or illness.

Worker's Comp 101

Worker's Comp 101

How does worker's comp insurance work?

Workers' compensation insurance provides payments regardless of who is at fault for work related injuries. The compromise of workers’ compensation means that, in exchange for this “no fault” environment, employees generally waive their right to litigation. In these situations, workers' compensation helps ensure businesses won't be financially crippled by costly disputes, but can still address and correct the issue at hand. Providing workers' compensation does not always guarantee an employee won't sue for injuries sustained on the job, however, because there are specific instances that permit a worker bringing his or her case to court.

Is workers' compensation insurance mandated?

Workers' comp insurance for the general public is state mandated, meaning that every state has its own worker’s compensation laws and programs for this coverage. Check  what is the required  law regulations for your specific area by visiting the U.S. Department of Labor's State Workers' Compensation Officials and clicking through to your state's site.

Importantly, most states explicitly prohibit employers from firing workers who plan to make a workers' compensation claim, and employers cannot tell workers not to file. Employers who use these types of intimidation tactics typically are trying to protect their reputation or keep their insurance costs from rising, but this should strictly be avoided.

How do I get workers' compensation insurance for my small business?

Have a broker or agent lead you through the process. An experienced agent, like an AmTrust Financial-appointed agent, can walk you through the buying process, and help you understand the various laws, class codes and underwriting involved with workers’ compensation insurance. The right agent can help relay your risk management strategy to insurers to help you get the best quote — and guide you through the claims process if something goes wrong.

  • Make sure the policy is specific for your industry. Every industry has its own safety risks. Running a manufacturing plant is far different than employing people at a call center. Make sure the workers’ comp policy you choose is tailored to those risks. If you’re employing people inside an office, a general policy will probably suffice. If you’re employing people who work with heavy equipment, or in dangerous conditions, you’ll likely want more coverage.
  • The price should match the risk. Make sure the price of your workers’ compensation insurance matches the risk profile of your business. Employing a group of salespeople should be far less expensive than a group of home builders. The National Council on Compensation Insurance (NCCI) identified approximately 700 job types broken out into “class codes” which are used to help determine coverage cost.
  • Know the state requirements. Some states require that businesses purchase workers’ compensation insurance if they employ just one employee, other states require coverage after five employees. Some regions will require workers’ compensation insurance if working with government entities — some will not. Getting educated on your state’s workers’ comp requirements is a good place to start.

What does workers' compensation cover?

Workers’ compensation insurance covers only injuries that occur at work or in the process of employment. This is known as “AOE/COE” — arising out of employment and occurring during the course of employment. This includes everything from a chef cutting herself with a knife to a construction worker breaking his leg after falling off a ladder. The injuries or illnesses can also be the result of cumulative trauma — like back injuries from lifting heavy materials or joint pain from repetitive motion.

Pre-existing conditions are a bit of a grey area. Sometimes a new injury can exacerbate an existing injury — and that would trigger coverage, although benefits may be reduced. If you hurt your knee on the job, but medical examinations find that you have arthritis in that knee, you’ll still get benefits because the new injury exacerbated the old one — but the benefits may be limited.

What does workers' compensation not cover?

While workers’ compensation is no-fault, certain claims generally are not covered, including when:

  • A worker intentionally inflicts his or her own injuries or illnesses.
  • The injury or illness occurs while the worker is doing something illegal.
  • The employee wasn't on the clock.
  • The worker's behavior was in clear violation of company policy or protocol.
  • The employee was under the influence of drugs or alcohol.
  • The injury occurs after an individual is laid off or terminated.

How much does it cost to get workers' compensation insurance?

Costs vary widely from state to state. Workers’ comp costs between $0.75 in Texas to $2.74 in Alaska per $100 in employee wages, according to the National Academy of Social Insurance.

Cost is also dependent on the type of work an employee does. The riskier the work, the more workers’ compensation insurance will cost. A clerical worker will certainly have a lower risk profile than a construction worker. In 2018, the Bureau of Labor Statistics reported workers’ compensation for sales and office professionals cost $0.22 per hour or 0.9 percent of overall compensation — while coverage for natural resources, construction and maintenance jobs cost $1.16 per hour, or 3.2 percent of overall compensation. The cost is often based on the classification by the National Council on Compensation Insurance (NCCI), an independent council that identified 700 “class codes” representing the risks of different job types.

How do state laws differ for workers’ compensation?

Some states, like California, are “no-fault,” meaning injured employees don’t need to prove that their injury was the fault of someone else to receive benefits. In “fault” states, it’s necessary to demonstrate who was to blame for an accident, making the claim resolution process longer and more arduous.

How do I determine my workers’ compensation rates?

Workers’ compensation quotes should be dependent on the amount of risk associated with your company’s tasks. The more risk, the more expensive your coverage will likely be. Those risks can be mitigated through comprehensive risk management practices that increase safety and drive down the amount of injuries or illnesses.

Rates are determined by premium rates from each employee classification code, annual payroll, and the experience modification factor. Here’s a basic example: If your construction staff is charged a rate of $2.50, you must pay $2.50 in premiums for every $100 your employees earn in payroll.

The next step is to divide each class code’s annual payroll by 100. Let’s say your construction staff earns $45,000 (divided by 100, that’s 450). Now multiply the new number (450) by the class code’s premium ($2.50 in this example). That gives us a grand total of $1,125 per year in premium costs for each construction worker. Add them together for all class codes and you have your total annual workers’ compensation insurance cost.

That cost is also subject to an experience modifier, which offers either a discount or surcharge based on claims experience over a three-year period. An applicant with little to no claims history could get an experience modifier of .90 — meaning they will be charged 90 percent of the cost as determined above.

In our previous example, premium costs of $1,125 would fall to  $1,012.50 ($1,125 x .90). If you’ve had some claims, that number could increase. For example if the experience modifier was 1.1, the coverage would be 10 percent higher. In our previous example, that would mean coverage would cost $1,237 ($1,125 x 1.1).

Adding the annual premiums for all class codes will give you the estimated cost of annual workers’ comp insurance for your entire staff.

Why choose AmTrust for workers’ compensation insurance for small businesses?


With an "A" (Excellent) rating by A. M. Best, AmTrust always seeks to deliver superior service at a rate that's both fair and affordable. With a variety of tools and resources at our disposal, we can provide you with a quote for small business worker’s comp insurance quickly and easily. We can even write your policy for completely new ventures that fit emerging demands in the market.

AmTrust and our agents recognize the importance of flexibility in today's business environment. We work close with the small and mid-sized businesses we insure to design the specific packages they need to comply and succeed. Additionally, we offer advanced reporting, monitoring and audit options so you can always see how your AmTrust policy is performing for you. To get the best policy, it matters which insurance company you choose for your workers’ comp – consider these five factors you should look for in your workers’ comp carrier.

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