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Small Business > Workers' Comp Premium Costs

Your state requires certain levels or coverage with workers’ compensation insurance policies, but it does not tell you what your premium levels should be. Your insurer looks at your company’s risk level and determines how much you should be paying. If you have good workplace safety programs and low injury rates, you may qualify for state-mandated credits and discounts when your premiums reach a certain level.

There is a base rate for each state, usually provided by the National Council on Compensation Insurance, which looks at your type of business and the data available from past years’ compensation claims to determine how much of a risk your industry poses.

Besides your industry base rates, workers’ compensation insurers also classify your employees using occupational codes. Each of these carries a certain risk and costs more or less depending on the risk involved. If you have a business where most of your employees are operating heavy machinery, you can expect to pay more than the same sized business with most employees having desk jobs.

A small employer with 10 to 20 employees can expect to pay on average $7,000 to $10,000 per year in workers’ compensation premiums. And after a year, your insurance company may adjust your premiums to take your claims history into account. The frequency and size of the claims are both looked at. You can attempt to lower your premiums by making your insurance company aware of improvements to your workplace-safety programs.

Some insurance companies may even provide a dividend in your workers’ compensation policy. If, at the end of the year, your losses have been less than the insurance company predicted when calculating your premiums, you can get a refund on part of what you’ve paid. This acts as a good incentive for management to implement further safety features in the workplace.