Workers’ compensation insurance (also known as workers’ comp or workman’s comp insurance) is a type of insurance coverage designed to provide financial protection for both employers and employees in the event of a work-related injury or illness. It is paid for by the employer and is one of the only types of commercial insurance that is legally required in most locations, even for small businesses.
This guide was created for businesses searching for the best workers’ compensation insurance providers. It covers everything you need to know about workers’ comp insurance, including how policies work, what they cover, costs, state requirements, and more. But first, let’s start with our list of the top carriers, including best overall and best for small business.
Best Workers’ Comp Insurance Companies
- NEXT is our top pick for workers’ compensation insurance
- Policies are affordable and easy to manage online
- The company receives excellent feedback from its growing customer base
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- Progressive is our top pick for small business customers
- Progressive Advantage program offers competitive pricing and access to other forms of commercial coverage
- Excellent financial strength and reputation with customers
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- Travelers is our runner-up pick for best workers’ compensation insurance
- America’s largest provider of workers’ comp insurance
- Employs an industry-leading team of claims and healthcare professionals
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Workers’ Compensation Provider Reviews
Because workers’ compensation insurance is a requirement in most states, the available policies tend to be extremely similar across providers. Because of this, insurance companies largely distinguish themselves by other factors, including their reputation with customers, financial ratings, pricing structures, available discounts, claims management practices, and industry expertise. For example, some insurers specialize in high-risk industries like construction, while others don’t offer coverage to businesses in those sectors.
To find the best workers’ comp providers, we considered all these factors and more, ultimately narrowing down our list to the following companies. For a more complete overview of our ranking criteria, refer to our detailed methodology section below.
NEXT (Best Workers’ Comp Insurance Overall)
Though it is only a few years old, NEXT Insurance has quickly become one of the most accessible and technologically proficient insurance companies on the market. Straightforward and detailed resources on the company’s website connect customers with rapid customer service, claims reporting, and all aspects of their accounts. This makes the company a sound choice for workers’ compensation insurance, which often requires immediate action and a quick response from the insuring company.
- Instant online access to a real-time updated certificate of insurance
- Risk management resources available online
- Doesn’t offer pay-as-you-go policies tied to current payroll
To make sure your workers are protected in case of a workplace accident, you’ll want a workers’ compensation insurance policy that fits your budget and covers potential employee medical expenses, loss of income, and more. At NEXT, a monthly workers’ compensation premium can cost as little as $14, but there are several factors your final cost depends on. These include how many risks your business or worksite poses, the number of workers you employ, and the nature of your profession.
If a company or business you’re working with requires you to provide evidence of valid business insurance, you’ll need to present a certificate of insurance, also known as a COI. This can be especially crucial for independent contractors, as employers may require a valid certificate before any further collaboration. With NEXT, you can request a COI simply by logging into your account. The document will instantly be sent to you and anyone else on your list via a link, email, or text message, both in and outside of normal business hours. Most states legally require employers to have a valid workers’ compensation policy, so having a COI on hand and readily accessible is undoubtedly helpful.
Despite its breadth of online tools, one downside to NEXT when compared to some competitors is that it doesn’t offer pay-as-you-go policies tied to real-time payroll data. What this means is that rather than having your monthly workers’ comp insurance payments based on actual payroll, they are instead estimated based on the previous year’s data. This can result in over- or under-payments, and ultimately adjustments at the end of the year. However, NEXT recently acquired AP Intego, a company that does offer pay-as-you-go policies. So NEXT may soon add this option to its policies.
Despite this minor drawback, NEXT has an excellent reputation among its customers. Its rating from the Better Business Bureau remains at a B+, which reflects its ability to respond to and address customer complaints that do arise.
NEXT Insurance is experienced in the essentials of small business insurance, including workers’ compensation policies. The company is proficient at creating tailored policies for each individual business and offers the convenience of accessing nearly everything its customers need online. These things, combined with NEXT’s broad range of commercial policy offerings, make it our pick as the Best Workers’ Compensation Insurance Company.
Progressive (Best Workers’ Comp Insurance for Small Business)
Founded in 1937, Progressive is one of the most notable insurers in the U.S., with particular strength for both personal and commercial vehicle insurance. However, through its Progressive Advantage Business Program, Progressive is also a major player in many other forms of small business insurance, including workers’ comp.
- Progressive Advantage program allows for competitive pricing and access to other forms of commercial coverage
- Offers a package of policies specifically tailored for contractors
- Excellent financial strength and reputation with customers
- Progressive does not directly underwrite workers’ comp policies, so may coordinate with additional carriers
Progressive offers the Advantage Business Program, which helps small businesses obtain the insurance coverage they need, even if it’s not directly offered by Progressive. Through this program, Progressive can connect businesses to third-party insurers for certain types of commercial insurance, including workers’ compensation in many cases. This allows businesses to bundle different commercial policies, saving money and accessing Progressive’s industry-leading coverages such as commercial truck and commercial auto. However, it’s important to note that managing different terms and requirements through separate carriers may be required.
Progressive demonstrates expertise in various small business industries by offering an extensive list of coverage types tailored to different industries and professions. Customers can be confident that whether they obtain coverage directly through Progressive or its partner carriers, they will find the right types and levels of coverage for their industry. Progressive also provides a contractors’ insurance package specifically designed for contractors and construction professionals through the Progressive Advantage Business Program.
Progressive offers competitive pricing through its Advantage program. According to Progressive’s website, the nationwide average monthly cost for workers’ compensation through Progressive Advantage is approximately $86. However, the actual cost of workers’ comp coverage will depend on factors such as the state, payroll, and claims history.
To obtain pricing information, customers can start a quote on the Progressive website or speak to an agent. By providing some information about their company, customers will receive several options with premiums and deductibles, helping them find the right coverage that suits their business needs and budget.
Progressive is financially secure and highly rated by reputable rating agencies. It has earned an A+ rating from AM Best, AA from S&P, and Aa from Moody’s, indicating its financial strength and low risk. Progressive also maintains a strong reputation with customers, earning an A+ rating with the BBB and having a low level of complaints with the NAIC.
Overall, Progressive is an excellent choice for workers’ compensation and other small business coverages. With its strong finances, competitive pricing, and solid reputation, it stands out as a reliable option. The Progressive Advantage Program simplifies the insurance shopping experience by providing access to various forms of commercial coverage not directly underwritten by Progressive. With its industry knowledge and offerings, Progressive is highly recommended as the Best Workers’ Compensation Insurance Provider for Small Businesses.
Travelers (Runner-Up Best Workers’ Comp Carrier)
Travelers Insurance is a well-established insurance company that offers workers’ compensation insurance for a variety of industries. As of 2022, it was the largest provider of workers’ compensation insurance in the United States.
- America’s largest provider of workers’ comp insurance
- Excellent financial ratings awarded by AM Best and S&P
- Industry-leading team of claims and healthcare professionals
- NAIC Complaint Index score indicates more complaints than average
- Online service is not available; customers must work with an agent or broker
Travelers Insurance is a property and casualty insurer that has been in existence since the mid-1800s. While it was founded as a fire insurance provider, the company now offers a variety of insurance products for both individuals and businesses throughout the world. In JD Power’s most recent Small Commercial Insurance Study, Travelers ranked above average, with a customer satisfaction index ranking of 847. The company has also earned excellent financial strength ratings from AM Best (A++) and S&P (AA).
As is standard in the industry, Travelers workers’ compensation policies cover medical expenses and lost wages for employees injured on the job, alongside liability coverage to protect businesses in the event of a lawsuit. Travelers also offers resources to help businesses reduce risk and prevent incidents from occurring in the first place.
One area where Travelers stands out is with its claims team. If an incident does occur at your business and you need to file a claim, Travelers employs over 2,000 claims professionals to provide expert service throughout the claims process, as well as nurses and other medical professionals who will work individually with injured employees to determine the best treatment plan and provide assistance as they recover.
Another thing we like about Travelers is that the company sells its commercial policies through a network of independent agents and brokers, rather than through captive agents that can only sell policies from a single insurer. This gives customers confidence that when they ultimately select a Travelers policy, the policy is the best choice for them.
One potential drawback of Travelers is that the company doesn’t currently offer pay-as-you-go workers’ compensation premiums. This means that premiums will be based on historical payroll data with adjustments made periodically to account for differences between the estimates and actuals. When compared to newer pay-as-you-go policies, this traditional method can result in unnecessary over- or underpayment that disrupts cash flow.
One final drawback to mention is that Travelers’s NAIC Complaint Index specifically for workers’ comp is slightly higher than average. This score, which evaluates the number of complaints compared to the market share held by the company, indicates more complaints than expected.
Despite these minor drawbacks, Travelers remains an excellent option for workers’ compensation insurance. Because of its size and experience, network of independent agents, and excellent financial strength ratings, we recommend Travelers as the Runner-Up Best Workers’ Compensation Insurance Company.
Hiscox (Runner-Up Best Workers’ Comp for Small Business)
Hiscox specializes in insurance for small businesses and offers all of the most common commercial policies, including workers’ comp.
- Specializes in the unique risks faced by small businesses
- Offers a better online experience than many of its larger competitors
- Its small business policies are known for being more affordable
- Not BBB accredited, with some occasional negative reviews
Hiscox Insurance is a well-established insurance company with origins dating back to 1901. They have over 100 years of experience providing various types of business insurance. Today, they operate in 14 countries and have over 500,000 small business customers.
Hiscox workers’ compensation insurance covers medical costs and a percentage of lost wages for employees who become injured or ill while on the job. Unlike some of its larger competitors, Hiscox does not offer the same level of risk management services or resources for customers to help prevent workers’ comp claims in the first place. However, given that these services mostly cater to larger firms, this likely isn’t much of a concern for its small business clientele.
On the other hand, Hiscox is known for offering more affordable policies than many of its competitors. This, in part, is accomplished by bundling multiple policies together into affordable packages tailored to different industries. For example, an architecture and engineering firm could bundle workers’ compensation insurance with professional liability insurance and a general liability policy.
Hiscox also maintains a strong reputation for its commitment to convenience and seamless online access, ensuring a hassle-free experience for customers seeking quotes, managing policies, and filing claims. The company offers a streamlined process for obtaining estimates on workers’ compensation insurance, allowing customers to quickly generate a quote by completing a form on their website or by consulting with an agent. When it comes to filing a claim, Hiscox provides multiple channels for submission, including online, telephone, and mail options. With their online claims center operating 24/7, customers have round-the-clock access to initiate and track their claims digitally. Alternatively, Hiscox encourages customers to reach out to the agent through whom they purchased their insurance, providing an additional avenue of support and familiarity during challenging situations. This personalized approach ensures that customers have the option to engage with a trusted contact while navigating the claims process.
Hiscox is not BBB-accredited, but the company has earned an A- rating with the organization, which indicates satisfactory and timely responses to customer complaints that do arise. While NAIC does not have any data on complaints for Hiscox workers’ compensation insurance, the company has a .90 complaint index for all insurance types, which indicates slightly fewer complaints than expected given its size. Hiscox has also earned excellent financial strength ratings, with A ratings from AM Best and S&P.
In summary, Hiscox stands as a highly regarded insurance company with a long-standing reputation of providing insurance coverage tailored specifically for small businesses. With robust financial ratings, they demonstrate their stability and reliability. Moreover, they provide convenient online quotes and claims services, making it easier for customers to manage their insurance needs. Considering these factors, we confidently endorse Hiscox as having the Runner-Up Best Workers’ Compensation Insurance for Small Businesses.
Embroker (Best Online Workers’ Comp Insurance)
Embroker is a recent addition to the online insurance industry, specializing in commercial insurance for businesses of various sizes. Their unique proposition lies in providing fully online insurance coverage, allowing busy business owners to conveniently purchase and manage their policies through their user-friendly platform.
- Innovative digital insurance company offering a simple online experience
- A growing company that has recently raised over $100 million in funding
- More limited experience, having only offered workers’ compensation insurance since 2019
- No BBB or NAIC profiles to gauge customer satisfaction
Founded in 2015, Embroker is a modern insurance company focused on delivering a streamlined online-insurance buying experience. While relatively new compared to established industry players, Embroker aims to redefine business insurance with a fresh and simplified approach. In 2019, they introduced workers’ compensation to their range of insurance products and have since raised an impressive $100 million in funding to fuel their expansion efforts.
Because Embroker is a newer insurance company, they do not have profiles on the NAIC Consumer Insurance Search or the Better Business Bureau, and they are not featured in the results of any recent JD Power studies. However, they do publish a net promoter score, which measures customer experience, of 70+. This is much higher than the insurance industry averages. Additionally, all of Embroker’s policies are reinsured by a panel of A or A+ AM Best-rated companies.
Embroker workers’ compensation insurance covers expenses related to employee injuries, illness, and death. This includes but is not limited to medical expenses, lost wages, death benefits, and rehabilitation expenses. It may also cover legal expenses if an injured employee sues your business. Coverage doesn’t include injuries during the daily commute or injuries that occur at team building events, happy hours, or other events in which alcohol or other substances are involved.
Embroker’s digital-first approach allows you to shop for insurance, get a quote, and make a purchase 100% online. This approach also allows you to file a claim and walk through the entire claims process online as well. While their approach to customer service is online-focused, they also offer customer service options via phone or email.
The cost of workers’ compensation insurance can vary greatly, based on the size of your business, the type of work your employees do, and your history of workers’ compensation claims. Because Embroker is a digital insurance company, it can often offer lower workers’ compensation premiums due to decreased operating costs compared to traditional insurance companies.
Because of the company’s seamless digital insurance services and positive business outlook, we recommend Embroker as offering the Best Online Workers’ Compensation Insurance.
The Hartford (Best Pay-As-You-Go Workers’ Comp)
The Hartford is a Connecticut-based insurer that has been in continuous operation since 1810. Today, The Hartford is the second-largest provider of workers’ comp insurance in the U.S. and one of the largest providers of commercial insurance overall.
- Standard coverages are more comprehensive than those offered by competitors
- Pay-as-you-go pricing and discount opportunities mean fair, accurate premium payments
- Strong track record and company reputation
- Relatively low ratings in some recent customer satisfaction studies
- No industry specialization in construction
The Hartford serves more than 1 million commercial customers and has been in business for over 200 years. With such a long track record in various forms of commercial insurance, The Hartford has one of the strongest reputations of any insurer. The Hartford maintains an A+ rating with the Better Business Bureau, an indication that The Hartford is trustworthy in dealing with its customers.
One downside of The Hartford is its J.D. Power rating. According to the most recent J.D. Power Small Commercial Insurance Study, The Hartford scored 819 out of 1,000 for customer satisfaction, which was below average in the category.
The Hartford’s workers’ compensation coverage is some of the best on the market today. The Hartford goes above and beyond what many other insurers provide in their standard packages with features like voluntary compensation, pay for loss of earnings, and stop-gap coverage for employer liability, all of which would require endorsements with other carriers. The Hartford also offers extended coverages (with slightly higher premiums) that include greater liability protections than the industry standard.
In addition to the features described above, The Hartford also has several fairly unique offerings in terms of care and treatment. For one, they have one of the largest networks of medical providers and pharmacies addressing workplace injuries—more than 1 million and 65,000, respectively—and nurse case managers to coordinate care and treatment. This means that The Hartford’s workers’ compensation policies effectively address not only the financial implications of an incident but also injured workers’ health and wellbeing.
One of The Hartford’s best features is its “pay-as-you-go” option, where the monthly premium is based on the employer’s actual payroll spend, versus an estimate of payroll that most insurance providers base premiums on. Customers may also be able to save by bundling their workers’ compensation policies with other forms of commercial insurance offered by The Hartford.
Since your insurance costs will depend on features unique to your business, the most accurate pricing information about The Hartford’s workers’ comp insurance will come directly from the provider. You can initiate a quote on The Hartford’s website to get a sense of what you might pay and a representative from The Hartford will follow up.
The Hartford does not specialize in construction or any industry in particular when it comes to workers’ compensation insurance. However, The Hartford has an extensive background covering businesses in every industry through their strong commercial insurance offerings, and with more than two centuries of experience, The Hartford has probably encountered most situations or unique circumstances that could arise. This background and experience make The Hartford a reliable provider for companies in any industry.
The Hartford is one of the longest-standing companies (let alone insurers) in the United States. With this extensive experience, The Hartford has a demonstrated track record of financial strength and stability. The major credit ratings agencies back this up, with AM Best rating The Hartford an A+, Moody’s awarding it an A1, and S&P offering an A+, all of which are excellent. The Hartford is also a publicly traded company, so anyone interested in learning more about the company’s financial situation has access to the company’s financial statements on their investor relations page.
Given its dominance in the commercial insurance space, excellent financials, and convenient pay-as-you-go options, The Hartford was a strong contender for our top pick. However, some recent customer satisfaction issues prevented them from achieving the #1 spot in our rankings. That said, for customers looking for the convenience of a pay-as-you-go workmans’ comp policy, we highly recommend The Hartford.
Nationwide (Best Workers’ Comp Insurance for Construction)
Nationwide is one of the largest insurers of any type in the U.S. Having been founded in 1926 in Ohio, Nationwide today truly lives up to its name, offering a comprehensive set of commercial insurance products in states across the country.
- Excellent reputation and customer satisfaction ratings
- Expertise in a variety of industries, with the ability to easily package additional relevant commercial policies
- Strong resources to help businesses manage health and safety risks
- Little pricing information is available without speaking to an agent
Nationwide has one of the strongest company reputations among commercial insurance providers. Of the companies evaluated in this guide, Nationwide ranked highest in J.D. Power’s most recent U.S. Small Commercial Insurance Study, with a score of 854 out of 1,000. Nationwide is also accredited by the Better Business Bureau with an A+ rating, meaning that they meet the BBB’s highest standards for fair business practices.
As a leading commercial insurance provider, Nationwide has a variety of options available in terms of coverage. Most businesses will find it convenient to work with Nationwide to identify a package of commercial coverages that make sense for them, including not only workers’ compensation but other protections for property, liability, auto, and other industry-specific coverage.
Nationwide’s workers’ compensation policy covers essential needs like paying for medical treatment, replacing lost wages, and protecting the business from liability claims. Nationwide also has a variety of endorsements available to extend your coverage if you are in an industry or location that creates greater coverage needs for your business.
As with other insurance carriers, the price you pay for Nationwide’s workers’ compensation insurance coverage will depend heavily on factors unique to your business, including your state, payroll, industry, and claims history. To learn more about what Nationwide’s coverage will cost your business, you can start a quote through Nationwide’s website or call to speak to an agent and learn more. Since Nationwide offers a variety of other commercial insurance policies, you should be sure to ask about discounts for packaging or bundling insurance products with Nationwide.
Nationwide is devoted to helping businesses find the appropriate coverages for their industry and needs. Nationwide has a helpful guide on its website to highlight important coverage considerations for different sectors like contractors, retail, professional offices, wholesalers, and more. These can include both workers’ compensation specifically and various other forms of commercial insurance important to your business. Nationwide’s expertise in a variety of industries, including construction, makes it easy to secure the right coverage.
Nationwide’s industry knowledge also extends to resources and services for risk management. For example, Nationwide has great resources for companies to evaluate their health and safety practices and work to reduce the risk of incidents that lead to claims.
Nationwide is one of the top 10 largest commercial insurers in the U.S. by premiums written, so they have impressive financial resources at their disposal. Nationwide also demonstrates excellent financial strength ratings from the top rating agencies, with A+, A1, and A+ marks from AM Best, Moody’s, and S&P, respectively.
Nationwide has good policy options, impressive financial strength, a strong reputation, and competitive prices, which make it a great all-around choice. However, Nationwide is especially strong on industry expertise, particularly for contractors, and for that reason, we recommend Nationwide as the Best Workers’ Compensation Provider for Construction Businesses and Contractors.
ADP (Best Option for Existing ADP Customers)
ADP is one of the leading providers of human resources and payroll technologies in the market today, and ADP’s affiliate, Automatic Data Process Insurance Agency (ADPIA), specializes in helping small and mid-sized employers find commercial insurance coverages and workers’ comp policies.
- Integration with ADP payroll software can make it easy to manage policies
- Pay-as-you-go insurance program helps calculate more accurate premiums
- Works with carriers specializing in high-risk businesses, like construction
- Operates as a broker rather than providing insurance directly
- May not make as much sense for businesses that do not already use ADP software
ADP has been offering human resources and payroll services and technology since 1949, and its affiliate, ADPIA, has operated since 1992. ADPIA serves more than 200,000 businesses, helping them to obtain group health insurance, workers’ comp policies, and other commercial insurance products. ADP is not listed on JD Power’s customer satisfaction study, but ADP does rate well with the Better Business Bureau. The company holds an A+ rating and is accredited with the BBB, which means that ADP meets the BBB’s highest standards for fairness and transparency with customers.
ADPIA is an insurance broker, rather than a direct carrier of insurance. This means that businesses shopping for insurance through ADPIA will be connected to another carrier to purchase the policy. As a broker, ADPIA partners with many top insurance carriers nationwide and can connect employers with policies that meet legal requirements in the state(s) where they operate. ADPIA also offers group health insurance and commercial coverages like BOPs and commercial auto.
One of the advantages of working with ADPIA as an option for workers’ comp is that the company’s payroll and HR technology helps make it easier to manage workers’ comp policies and premium payments. With the Pay-By-Pay® Premium Payment Program, ADP automatically calculates and forwards workers’ comp payments to the insurance carrier each time a business runs its payroll. This pay-as-you-go structure results in more accurate premium payments, improved cash flow, and easier audit processes.
Initiating quotes with ADPIA is easy and can be done through an online form or by telephone. ADP helps shoppers identify coverages they might need, including workers’ comp and other commercial policies, and offers quotes from within ADPIA’s network of partner carriers. If using ADPIA for workers’ comp coverage, the Pay-By-Pay program allows customers to avoid paying upfront premium deposits, and ongoing premium payments are based on actual payroll, which means that premiums should be more accurate over time and over- or under-payments will be less likely.
As a major player in payroll, HR, and financial services, ADP and ADPIA work with a wide variety of industries and businesses of different sizes. But ADPIA is a particularly good option for businesses with complex needs or a high-risk profile that might otherwise limit their options for workers’ comp coverage. ADPIA states that its network of carriers provides good coverage options for more hazardous industries, including specialties like construction, carpentry, and masonry.
ADP has its own financial strength ratings including an Aa3 from Moody’s and an AA- from S&P, but it is important to remember that ADPIA is a broker rather than an insurance carrier. While ADPIA advertises that it works with some of the top-rated insurers in the country, businesses looking for workers’ comp coverage through ADPIA should evaluate the financial strength of the carriers that ADPIA connects them with.
ADPIA is a good choice for many reasons, but its standout attribute is the ability to use ADP payroll technology for payment processing, which increases efficiency and reduces over- and under-payments on workers’ compensation premiums. For this reason, ADP is our top choice for existing ADP customers.
List of Workers’ Compensation Insurance Carriers by Market Share
|8||BCBS of Michigan||3.1%|
|9||State Insurance Fund||2.8%|
What Is Workers’ Comp Insurance & How Does It Work?
Before committing to a workers’ compensation insurance policy, it’s helpful to understand the basics of these policies and the various coverage options available.
What Is Workers’ Compensation Insurance?
Workers’ compensation insurance, also known as workers’ comp or workmans’ comp, is a legally-required form of coverage designed to protect workers who become injured or suffer an illness on the job. Workers’ comp policies consist of two primary parts:
- Part One: Workers’ Compensation Insurance
- Part Two: Employers’ Liability Insurance
The workers’ compensation portion of the policy offers crucial protection by providing benefits to employees who experience work-related injuries or illnesses. It covers various expenses, including medical treatment, rehabilitation costs, and lost wages. In return for these benefits, employees generally agree to waive their right to sue their employer for negligence pertaining to the incident.
The second part of the policy, known as employers’ liability insurance, serves as an additional layer of coverage. It protects employers in the event that employees who are not covered by workers’ compensation or those who assert employer negligence file lawsuits. Employers’ liability insurance covers legal defense costs, settlements, or judgments that may arise from such lawsuits.
By combining these two components, workers’ compensation insurance aims to ensure that employees receive necessary benefits while providing employers with protection against legal claims related to workplace injuries. It establishes a system that supports injured workers, promotes workplace safety, and mitigates the risk of extensive litigation.
How Workers’ Compensation Insurance Works
Most employers are legally required to obtain workers’ compensation insurance coverage, either through a private insurance carrier or through a state-operated fund (more on that below). Should a qualified workplace injury occur, the insurer agrees to pay all benefits owed to the employee subject to the state’s workers’ compensation laws. Part One of a workers’ compensation policy is unique in that there are no policy limits or deductibles, and premiums are based primarily on the employer’s payroll and duties carried out by its workers.
Employers are responsible for informing their employees about their workers’ compensation benefits and providing them with the necessary information on how to report incidents. The specific reporting procedures may vary by jurisdiction, but they generally involve notifying the employer and filing the claim with the insurance carrier within a certain timeframe. Information collected on the claim form typically includes details about the injury or illness, medical treatment received, and other relevant information.
The insurance company will review the claim to assess its validity and determine if it falls within the scope of covered injuries or illnesses. This typically involves investigation, consultation with medical professionals, and verification of the incident. If the claim is approved, the injured employee becomes eligible to receive certain benefits, such as medical expenses, rehabilitation services, disability payments, and in the case of fatal injuries, death benefits for dependents.
It’s important to note that employees are not required to accept the insurer’s offer. If the employee is not satisfied with the proposal, he or she can dispute it, seeking either a restructured workers’ compensation settlement or a lump-sum payment. If the employee refuses the offer and fails to settle negotiations with the parties involved, the employee may decide to sue for additional damages.
It is in situations like these where the employers’ liability component of the workers’ comp policy kicks in, providing coverage for legal fees, damages, and settlements. However, it is usually in the best interest of both sides to resolve the dispute outside of court, as trials are costly, time-consuming, and unpredictable.
Workers’ Comp Requirements
Workers’ compensation is subject to state-level regulation in the United States, and the specific requirements and coverage details can vary. With the exception of Texas, workers’ compensation insurance is mandatory in some form in every state. However, sole proprietors and partnerships without employees are usually not required to secure coverage. While the majority of states require all businesses with employees to have workers’ compensation coverage, there are variations in the threshold for coverage based on the number of employees.
For instance, in states like Missouri and Alabama, only employers with five or more employees are mandated to carry a workers’ compensation policy. That said, it’s important to note that even in these states, there are exceptions to this threshold. Construction businesses, for example, are often required to maintain workers’ compensation insurance regardless of the number of employees.
Given these differences, employers must familiarize themselves with the specific requirements of their state to ensure compliance with workers’ compensation laws. In certain states that require companies to carry workers’ compensation insurance, like California, not having it is considered a criminal offense that can result in fines, imprisonment, or time in county jail.
State Workers’ Compensation Funds
In most states, employers can purchase workers’ compensation insurance from private insurance carriers that compete in the market. However, so-called monopolistic states have established exclusive state-operated insurance programs that are the only option for employers to obtain workers’ compensation coverage. Currently, North Dakota, Ohio, Washington, and Wyoming are the only four monopolistic states in the U.S. where employers must obtain workers’ comp coverage through the state.
In addition to monopolistic state funds, some states offer competitive state funds that give employers the option of obtaining coverage through the state or through a private carrier. These funds routinely serve as a backup option for employers who are unable to obtain workers’ comp coverage through a private carrier due to their industry, history of claims, or overall risk profile. States with competitive state funds include California, Colorado, Hawaii, Pennsylvania, and Texas, among others.
While workers’ compensation insurance obtained through private carriers usually includes two parts—workers’ compensation coverage and employers’ liability coverage—policies obtained through state funds do not include the employers’ liability component. Because of this, businesses that secure workers’ comp coverage through a state fund usually purchase a separate employers’ liability policy through a private carrier. These can either be purchased as standalone policies or added to an existing general liability policy.
Workers’ Compensation Coverage & Benefits
Workers’ compensation policies provide coverage for all employees of an insured company, regardless of their employment status (full-time, part-time, or seasonal). However, business owners, partners, and contractors are typically not automatically covered by the workers’ compensation policy.
The injuries or illnesses covered by workers’ compensation insurance can occur both within and outside the workplace but they must be directly related to the job duties. For example, an employee injured in a vehicle accident commuting to work will not qualify for workers’ comp coverage; however, an employee injured while driving for work (such as a delivery driver) will qualify.
Workers’ compensation policies offer coverage for a diverse range of conditions and injuries. These can include acute injuries such as fractures, cuts, or sprains, as well as chronic conditions like cancer, asthma, carpal tunnel syndrome, or headaches. Additionally, workers’ comp can provide benefits for injuries resulting from workplace violence and even stress-related mental health conditions like post-traumatic stress disorder (PTSD).
While the specific coverage details will vary by state, standard workers’ compensation policies cover costs and expenses that fall into the following categories, each of which is explored in more detail below.
- Medical expenses
- Disability benefits
- Vocational rehabilitation
- Death benefits
- Employers’ liability
When workers sustain work-related injuries or illnesses, they have the right to receive all necessary and suitable medical treatment. This encompasses a range of healthcare services, including doctor visits, diagnostic tests, surgeries and procedures, hospitalizations, nursing care, medications, physical therapy, and the provision of medical equipment such as crutches or wheelchairs.
However, to manage costs associated with workers’ compensation, states implement utilization management guidelines that place certain restrictions on treatment options. These guidelines aim to ensure that medical care remains appropriate and cost-effective. Examples of such guidelines include pre-authorization requirements, second opinion requirements, approved treatment options, and limits on treatment duration and frequency.
Disability benefits serve to replace a portion of the wages an employee will lose as a result of missed work due to the injury. Depending upon the type of injury and the impact it has on an employee’s ability to work, there are four different types of disability benefits available.
- Temporary total disability: This type of disability pay applies when a worker is entirely unable to work during a relatively short-term recovery period. For example, a worker who requires an eye procedure that leaves them temporarily unable to see may receive temporary total disability benefits during that time. Typically, following the waiting period, a worker can expect these benefits to be calculated as 66.67%, or two-thirds, of their weekly income and may be subject to minimum and/or maximum amounts.
- Temporary partial disability: Temporary partial disability benefits are available when a worker is partly unable to work, either in duration or in scope, during a relatively short-term recovery period. For example, a worker who injures their back might only be able to work part-time or in a different capacity. In these situations, the worker may receive temporary partial disability benefits. Typically, a worker receiving temporary partial disability benefits can expect to be paid an amount that is somewhere in between the wage for the new, limited role and their role before the injury.
- Permanent total disability: Permanent total disability benefits are available when a worker is entirely unable to continue earning as a result of a lasting injury or illness. For example, a worker who suffers from paralysis or a severe brain injury may recover permanent total disability benefits. Typically, a worker can expect these benefits to be 66.67% of their average weekly wage until death or retirement, depending on state laws.
- Permanent partial disability: Permanent partial disability pay applies when an injured worker is permanently prevented from earning as much as before. For example, a worker who loses their hearing may have a more difficult time working and may recover permanent partial disability benefits. The factors that determine the amount that will be paid include the extent of the injury, loss of wages, and future earning capacity. Some states may have specific laws that specify partial disability benefits for different injuries.
The table below summarizes the different types of disability benefits, when they apply, and what coverage should be expected in each case:
|Disability Type||Description||Example||Typical Coverage*|
|Temporary Total||Temporary disability that prevents work during recovery||A construction worker breaks his leg, needs surgery, and can’t work during the recovery.||2/3 of average weekly income for a limited time|
|Temporary Partial||Temporary disability that limits work during recovery||A secretary undergoes surgery for carpal tunnel syndrome. He can work, but can’t type during his recovery.||2/3 of the income difference|
|Permanent Total||Permanent disability that prevents future work||An industrial worker becomes paralyzed after an equipment accident and cannot work again.||2/3 of average weekly income until death or retirement|
|Permanent Partial||Permanent disability that limits future work||A factory worker suffers an eye injury that permanently limits his eyesight.||Varies|
A worker whose injury or illness caused a permanent partial disability may be entitled to vocational rehabilitation benefits, also sometimes referred to as supplemental job displacement benefits. This money is used to train or retrain a worker to be able to work in a new capacity.
For example, in California, supplemental job displacement benefits include training at any authorized place, such as any California public school; the cost of licensing, certification, and testing fees; the cost of any tools or materials needed for training; etc. The benefit comes in the form of a non-transferable voucher worth about $6,000 and also can be used for expenses put towards locating a new job and even reimburses some miscellaneous expenses.
Employers can often make rehabilitation benefits obsolete by offering suitable regular, modified, or alternative work available within the statutory period, usually 30 or 60 days from the time that it is confirmed that there is a permanent partial disability. If not, then this aspect of workers’ comp insurance is designed to cover the process of returning a permanently partially disabled worker to the workforce.
Workers’ compensation death benefits are designed to provide financial compensation to the dependents of a worker who dies as a result of work-related causes. Death benefits may cover funeral expenses and provide income replacement for those who relied on the deceased worker’s earnings. While the eligibility and amounts of obtainable benefits vary by state, whether someone is a total or partial dependent will impact the amount of money they receive.
Common examples of total dependents include minor children, a surviving spouse who doesn’t work, or disabled adult children. Examples of partial dependents may include a working spouse, grandchildren, parents, siblings, or in-laws.
Death benefits may include various forms of financial compensation, such as a lump-sum payment or ongoing periodic payments. The amount and duration of the benefits depend on the laws and regulations of the specific jurisdiction, as well as the worker’s average wage or income.
For example, in California, one total dependent will receive weekly installments, at the total temporary disability benefits rate, with a maximum of $250,000 paid out, plus $10,000 for burial expenses. No less than $224 will be paid per week. The benefits maximum raises to $290,000 for two total dependents and to $320,000 for three or more. California has other very specific payout calculations based on the number of total and partial dependents receiving benefits.
In Colorado, installments are paid at the same rate as in California (66.67% of the deceased worker’s weekly salary), but the maximum amount available is set by law each year. The Colorado Director of Workers’ Compensation determines how much each dependent receives based on their reliance on the worker, proportionately. The rest of Colorado’s laws for disbursement are rather specific and depend significantly on the dependent’s relationship to the deceased. Reference Colorado State’s website for more information.
Be sure to research your state’s workers’ compensation laws in order to know how death benefits pay in your jurisdiction.
As discussed above, workers’ compensation policies purchased through private insurance carriers have two parts. Part One (Workers’ Compensation) provides coverage for state-specific workers’ compensation benefits, while Part Two (Employers’ Liability) protects employers from potential lawsuits filed by employees who are not satisfied with the benefits offered under Part One.
The workers’ compensation component is a legal requirement for most employers, covering the costs associated with work-related injuries or illnesses sustained by employees. It includes coverage for medical expenses, rehabilitation costs, and lost wages (either in the form of disability payments or death benefits). The benefits provided under Part One apply regardless of who is at fault and the amounts received have limits set by state laws. In return for receiving Part One benefits, employees will typically waive their right to sue their employer for negligence.
While employers’ liability insurance is not legally required as a separate coverage, it is an integral part of standard workers’ compensation policies. It is automatically included to provide employers with protection in the event that employees pursue legal action beyond the benefits offered by workers’ compensation. The employers’ liability component covers the costs of legal defense, settlements, and judgments. Unlike Part One of the policy, where fault is not a requirement for receiving benefits, Part Two requires employees to demonstrate that the employer was at fault for their injuries, either through intentional misconduct or negligence.
It’s important to note that employers’ liability coverage comes with policy limits. These limits determine the maximum amount of money that the insurance company will pay for legal expenses and settlements. Unlike workers’ compensation benefits, which have statutory limits set by state laws, the limits for employers’ liability coverage are determined by the employer and the insurance company when the policy is established.
The table below outlines the key differences between workers’ compensation (a.k.a. Part One or Coverage A) and employers’ liability coverage (a.k.a Part Two or Coverage B).
Workers’ Compensation vs. Employers’ Liability Insurance
|Part One (Workers’ Comp)||Part Two (Employers’ Liability)|
|Legally Required?||Yes, in most cases||No|
|Who It Covers||Injured employees||Employers facing lawsuits|
|Covered Costs||Medical, rehab, lost wages||Defense, settlements, judgements|
|Legal Standard||Applies regardless of fault||Employers must be found liable|
|Policy Limits||Set by state laws||Determined by employer|
Workers’ Compensation Insurance Exclusions
Workers’ compensation policies outline very specifically who and what is covered by the policy. This section outlines who and what is not covered by the policy.
Business owners, sole proprietors, volunteers, independent contractors, longshoremen, railroad employees, and federal employees are not covered by standard workers’ compensation policies.
In most states, business owners and sole proprietors are exempt from workers’ compensation policy requirements until they have employees. However, business owners and sole proprietors usually can still choose to purchase a policy and carry coverage if their state allows it.
Additionally, federal employees, railroad employees, and longshoremen fall into different categories of workers that use different systems to provide injury benefits and protection. Federal employees are covered through the Federal Employee’s Compensation Act. Railroad workers and longshoremen also have unique programs and laws that dictate how they receive coverage that is different from standard workers’ compensation policies.
Specific Types of Injuries
As discussed above, workers’ compensation policies are only meant to cover injuries and illnesses that occur at, or result from, employment with the insured company. Injuries that occur outside of work would instead be covered by a separate disability insurance policy. This means that the following types of injuries are not covered by workers’ compensation coverage:
- Injuries that occur outside of the workplace or line of duty
- Injuries that occur while commuting to and from work
- Injuries due to substance abuse or intoxication
- Intentional injuries
Specific Types of Expenses
Workers’ compensation coverage is intended to only compensate for the costs of medical expenses, lost wages, vocational training, death benefits, and employers’ liability. While other types of expenses may be covered in unique circumstances, costs falling outside of these categories will usually not be covered. Such uncovered costs might include wages for a replacement worker or fees and penalties imposed by the Occupational Safety and Health Administration (OSHA). Businesses will have to cover those costs themselves.
Every workers’ compensation policy will list explicit exclusions, or things that the policy does not cover. These exclusions define certain types of workers, injuries, and expenses that fall outside of the policy’s coverage. Generally, these exclusions will match what we’ve described above—that specific types of workers and injuries occurring outside of normal work procedures are not covered by the policy. However, sometimes policies will include a list of exclusions that define additional items (types of workers, injuries, or scenarios) that fall outside of coverage. It is important to read through the policy to understand both what will, and will not, be covered.
Workers’ Compensation Insurance Costs
Determining the overall expenses associated with a workers’ compensation policy involves considering more than just the premiums. Buyers must also factor in deductible payments and the cost of managing claims if unfortunate incidents arise. It comes as no surprise that minimizing workers’ compensation costs requires a two-pronged approach: selecting an affordable policy and actively cultivating a safe work environment to prevent claims.
While policy premiums represent a significant portion of the expense, it’s crucial to account for deductible payments. Deductibles are the amounts the policyholder is responsible for paying before the insurance coverage kicks in. Opting for higher deductibles can result in lower premiums, but it means assuming a greater share of the financial burden in the event of a claim.
Moreover, the cost of handling claims must be taken into consideration. This includes expenses related to investigations, legal proceedings, medical treatments, rehabilitation, and wage replacement. By prioritizing safety measures and implementing thorough risk management practices, businesses can minimize the likelihood of workplace accidents, injuries, and subsequent claims. Maintaining a safe work environment not only safeguards employees but also reduces the financial impact of workers’ compensation insurance.
How Much Does Workers’ Compensation Insurance Cost?
According to the Bureau of Labor Statistics (BLS), workers’ compensation insurance expenses are relatively modest compared to other employee benefits. In 2022, employers nationally paid an average of $0.46 per hour worked for expenses related to workers’ comp coverage. This figure translates to approximately 1.1% of total compensation (including benefits) or 1.6% of wage and salary payments.
To illustrate the potential costs, let’s consider a hypothetical scenario involving a small business with 10 covered employees, each earning an annual salary of $50,000. In this case, the business could anticipate an approximate annual expenditure of $8,000 related to workers’ compensation insurance.
To provide further context, the table below showcases the total employer costs per hour worked for various common employee benefits. With workers’ compensation insurance expenses amounting to just $0.46 per hour worked, they represent roughly one-seventh of employer health insurance costs and less than one-third of paid vacation benefits.
(per hour worked)
|Paid vacation leave||$1.55|
|Paid sick leave||$0.50|
|Overtime and premium pay||$0.37|
|Short-term disability insurance||$0.08|
|Social Security and Medicare||$2.39|
Keep in mind, the data here represents U.S. averages across all occupations and business types. Exactly how much insurance will cost your firm depends on several factors, the most important of which are outlined below.
Factors That Affect Workers’ Comp Rates
- Annual payroll: The wages of an injured employee are directly proportional to their payout on a claim, so payroll is a significant factor in determining the cost of the policy. Generally, as your payroll grows, you can expect to pay more for coverage.
- Location: Workers’ compensation insurance rates vary by location due to differences in state laws and market conditions. For example, states with more generous benefits often have higher workers’ compensation rates to cover the higher costs. Similarly, states with higher medical costs also often have more expensive workers’ compensation policies.
- Industry and occupation: Different industries and occupations have different levels of risk associated with workplace injuries. For example, businesses that employ construction or manufacturing workers will face higher workers’ comp rates compared to firms that employ office-based workers.
- Claims history: Businesses with a history of workers’ compensation claims, especially severe or frequent ones, will likely have to pay more for coverage. Insurance companies consider your claims history as an indicator of risk.
- Safety measures: Implementing safety provisions and risk management practices can help lower your workers’ compensation costs both directly and indirectly. Insurers often offer lower rates to businesses with strong safety measures in place. At the same time, businesses that prioritize safety will be less likely to experience an expensive claim.
- Deductible: Employers will sometimes have the option to set a higher or lower deductible payment, which will raise or lower the regular premiums. There is an inverse relationship between the monthly premium and the deductible. That is, when the monthly premium is higher, the deductible is lower, and vice versa. By paying more every month in premiums, the employer could pay less towards a claim in the form of a deductible. On the other hand, choosing a policy with low premiums might mean a higher deductible payment down the line.
Workers’ Compensation Rates by Industry
|Industry||Cost per Hour Worked||Percentage of Wages||Percentage of Total Compensation|
|Education and health||$0.37||1.2%||0.9%|
|Leisure and hospitality||$0.31||2.1%||1.7%|
|Professional and business||$0.36||1.0%||0.7%|
|Trade, transportation, and utilities||$0.53||2.2%||1.6%|
|All private industry workers||$0.45||1.6%||1.2%|
Workers’ Compensation Rates by Occupation
|Occupation||Cost per Hour Worked||Percentage of Wages||Percentage of Total Compensation|
|Construction and maintenance||$1.13||4.0%||2.7%|
|Production and material moving||$0.76||3.4%||2.3%|
|Sales and office||$0.27||1.2%||0.9%|
Methodology: How We Compare Workers’ Compensation Insurance
The process of selecting workers’ compensation coverage can be difficult. Many companies offer policies, but they don’t always make it easy to understand the details of their coverage options and pricing. To help you find the best policy, our research team evaluated all of the top national carriers. We considered their coverage options, pricing, discounts, industry specializations, financial strength, and lastly, reputation to create our list of the best workers’ compensation insurance companies. Each factor is explained in more detail below.
- Coverage: State laws largely dictate coverage provided by standards workers’ comp policies; however, policies can differ in the availability of “other states” coverage, employers’ liability coverage and limits, as well as whether the policy has a duty-to-defend provision in the case of an incident. We favored companies that offer “other states” benefits, flexibility in their employers’ liability coverage, and duty-to-defend options.
- Pricing options & discounts: While workers’ compensation rates largely depend on location and the specifics of the business covered, some insurers offer a variety of discounts for companies with a strong track record of safety. Another option that can help reduce the burden of workers’ comp premium payments is choosing a pay-as-you-go payment plan. Carriers that offered the best discounts and pay-as-you-go policies were ranked highest.
- Industry specialization: Because not every carrier will offer workers’ compensation coverage for high-risk industries like construction or manufacturing, it can be hard for employers in these industries to find coverage. For this reason, we included a few insurance companies that do offer coverage for industries more prone to accidents.
- Financial strength: Financial strength, and thus, ability to pay claims is another important factor when comparing insurance providers. We evaluated ratings from AM Best, Moody’s, and S&P.
- Company reputation: To evaluate each company’s reputation we compiled data from multiple sources, including the National Association of Insurance Commissioners, Better Business Bureau, J.D. Power, and a handful of other sources for online company reviews. In evaluating customer feedback and complaints, we focused specifically on customers’ satisfaction with claims handling and the value they received from their policies.
Frequently Asked Questions
Workers’ compensation insurance and health insurance are distinct forms of coverage, each serving specific purposes and adhering to different regulations. The primary contrast lies in their coverage scope. Workers’ compensation insurance focuses exclusively on work-related injuries and illnesses that transpire during employment, ensuring employees receive benefits regardless of fault. Conversely, health insurance encompasses a broader range of medical expenses, such as injuries that occur outside of work, preventative care, and routine medications.
Another significant distinction is the breadth of coverage. While health insurance typically covers direct medical expenses, workers’ compensation insurance extends its scope beyond medical bills. It can encompass vocational training, lost wages during the recovery period, and, if necessary, funeral expenses. This comprehensive coverage acknowledges the broader impact of work-related injuries on employees’ lives.
Furthermore, workers’ compensation insurance is generally mandatory for most employers, depending on the jurisdiction. Employers are typically obligated by law to provide workers’ compensation coverage to protect their employees. In contrast, health insurance coverage is optional for employers (except for specific circumstances outlined in the Affordable Care Act) and often involves shared contributions from employers and employees.
Workers’ comp and disability insurance both provide financial protection in the event of injury or illness, but they differ in scope and application. Workers’ compensation insurance specifically covers work-related injuries and illnesses, offering benefits such as medical expenses, vocational rehabilitation, and a portion of lost wages. Disability insurance, on the other hand, generally covers disabilities that are not work-related and provides income replacement if an individual becomes unable to work due to an injury or illness.
Whether or not a business owner is covered under workers’ comp policies depends on several factors, including the business structure, state regulations, and the insurance provider’s policies. In general, sole proprietors and non-employee business owners (such as in partnerships or LLCs), are typically not automatically covered by workers’ compensation insurance. However, they often have the option to opt-in for coverage by purchasing a policy that includes them. On the other hand, owners of corporations who are classified as employees of the corporation may be eligible for coverage under standard workers’ compensation policies, although this eligibility can vary by state.
Workers’ compensation is designed to provide coverage for employees, who are individuals hired by a company under an employment agreement. Independent contractors, on the other hand, are considered independent workers who operate their own businesses and are not considered employees. Thus, if you work as a contractor for another company, you will not be covered by their policy.
Employees can be covered by workers’ compensation insurance when they travel to other states, albeit with considerations based on policy provisions, reciprocity agreements between states, and state laws. Many insurance carriers provide an option called “other states coverage” within their workers’ compensation policies. This provision, where permitted by the law, ensures that employees receive workers’ comp benefits when they temporarily work in a different state. However, it’s important to review the specific details of the policy and consult with insurance professionals to ensure compliance with the laws of both the home state and the state where the employee is temporarily working.
Each company featured in our guides has been independently selected and reviewed by our research team. If you select one of these companies and click on a link, we may earn a commission.
By clicking on these links, you may be taken to one of our insurance partners. The specific company listed here may or may not be included in our partner’s network at this time.