Workers' Compensation Insurance for small businesses

Carriers we cover for workers' compensation insurance

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Workers' compensation is the only commercial insurance policy legally required of most employers in 49 of 50 U.S. states — the sole exception is Texas, where private employers can legally opt out as "non-subscribers" but forfeit the tort immunity the workers' comp bargain provides.¹² Across Insureon's small-business marketplace, small businesses pay a median of $54 per month for workers' comp, with the full premium range spanning $300 to over $5,000 per year depending on industry class code, state, and payroll.³ Travelers' 2024 Injury Impact Report — one of the most comprehensive published datasets on small-business workplace injury trends — identifies the core claim patterns that drive WC losses: overexertion, falls, and being struck by objects, with cumulative-trauma musculoskeletal injuries rising as a share of total claims.⁴

Because workers' comp is statutorily required rather than contractually required, the page structure below differs from other commercial lines: state-by-state requirements are a first-order concern, monopolistic-fund states require a different purchasing path, and coverage availability varies sharply by state. Every factual claim is tied to a cited source.

Who needs workers' compensation

The statutory baseline. 49 of 50 states require most employers to carry workers' comp once they cross a state-specific employee threshold.² Employee thresholds vary:

• One-employee states — California, New York, and most other populous states require WC coverage from the first employee.
• Higher-threshold states — Alabama, Mississippi, and Missouri require coverage once an employer has 5 or more employees; Arkansas, Georgia, New Mexico, North Carolina, and Virginia use 3-employee thresholds; Tennessee uses 5 in most industries.
• Texas non-subscriber option — Texas is the only state where private employers can legally operate without WC. Non-subscribers retain the right to bargain with injured workers individually but lose the tort-immunity "workers' comp bargain" — injured employees can sue the employer for negligence without the statutory damages cap.⁵

Sole proprietors, partners, and owners. In most states, owners and partners without employees are exempt from mandatory WC. Many states allow elective coverage if the owner wants the medical and lost-wage benefits WC provides. Some occupations (construction in particular) have owner-inclusion rules that override the general exemption; check the state rule before assuming owner-exemption.

Independent contractors. Genuine independent contractors are generally not "employees" for WC purposes and are not covered by the hiring business's WC policy. States vary widely in how they classify workers — misclassification of employees as contractors is a common WC audit issue. If a state's labor department determines a "contractor" is actually an employee, the business owes back premiums and potentially penalties for the misclassified worker's payroll.

Industry-specific detail: WC is particularly consequential for industries with physical labor exposure. See our industry pages for general contractors, restaurants, landscapers, cleaners, electricians, plumbers, HVAC businesses, and fitness and wellness.

What workers' compensation covers

Workers' comp is no-fault coverage: it pays injured-employee benefits regardless of who caused the injury, and it is generally the employee's exclusive remedy against the employer for work-related injuries.¹⁶ Coverage categories:

• Medical expenses — all reasonable and necessary medical treatment for the work-related injury or illness, typically without a deductible or copay from the employee.
• Lost wages (indemnity benefits) — typically two-thirds of the employee's average weekly wage, subject to state-specific maximums and waiting periods, while the employee is medically unable to work.
• Permanent disability benefits — lump-sum or periodic payments for permanent impairment or loss of earning capacity, based on state-specific disability rating schedules.
• Vocational rehabilitation — retraining and job-placement services for workers who cannot return to their previous occupation.
• Death benefits — payments to surviving dependents, plus funeral expenses, if a work-related injury results in death.

Employer's liability coverage (Part Two). In private-market states, the standard WC policy bundles employer's liability coverage that pays when an employee's injury triggers a lawsuit outside the WC statute. Examples: a spouse filing a loss-of-consortium claim following a worker's serious injury, or a "third-party over" action where a subcontractor's employee sues the general contractor. Typical employer's liability limits are $100,000/$500,000/$100,000 (bodily injury by accident / bodily injury by disease policy limit / bodily injury by disease per employee), with higher limits available.

Monopolistic-state Stop Gap coverage. In the four monopolistic states (ND, OH, WA, WY), the state fund writes the statutory WC coverage but does not provide employer's liability. Employers in those states need to add Stop Gap employer's liability coverage to their general liability policy to fill the gap.⁷

What workers' compensation doesn't cover

WC is tightly scoped to work-related injuries and illnesses. Standard exclusions:

• Injuries outside the course of employment. Commuting to and from work, personal errands unrelated to the job, and injuries during off-the-clock activities are generally not covered.
• Intentional self-inflicted injuries. Self-harm is excluded, as is injury while committing a crime.
• Intoxication injuries. Injuries sustained while under the influence of alcohol or drugs (in violation of company policy) are typically excluded.
• Fights and horseplay. Injuries from workplace fighting or horseplay unrelated to work duties may be excluded depending on state rules.
• Independent contractor injuries. Genuine contractors aren't covered under the hiring business's WC policy.
• Non-occupational illnesses. Ordinary illnesses that aren't work-caused (e.g., a cold caught in the office) are outside the WC coverage grant.

Employment practices claims — wrongful termination, discrimination, harassment — are not WC claims; they're addressed by employment practices liability (EPLI). This distinction matters because many workplace disputes touch both categories: an employee injured at work who then alleges retaliatory discipline has a WC claim for the injury and potentially an EPLI claim for the retaliation.

Policy limits and how to choose them

WC has a different limit structure than other commercial lines. The statutory WC benefits themselves are not subject to a policy limit — they're defined by state statute and paid by the insurer up to whatever the statute requires, with no per-claim or aggregate cap on statutory benefits.¹ The policy "limits" that buyers actually choose apply to the employer's liability (Part Two) coverage:

• Bodily injury by accident — each accident: typical baseline $100,000; commonly raised to $500,000 or $1,000,000.
• Bodily injury by disease — policy limit: typical baseline $500,000; commonly raised to $1,000,000.
• Bodily injury by disease — each employee: typical baseline $100,000; commonly raised to $500,000 or $1,000,000.

Why many businesses increase employer's liability limits: third-party-over actions and loss-of-consortium claims can produce damages well above the $100K baseline. Construction subcontractor agreements frequently require minimum employer's liability limits of $500,000/$500,000/$500,000; some general-contractor contracts require $1M/$1M/$1M. Raising employer's liability limits adds materially less to premium than raising a GL primary by the same amount.

Experience modification factor ("mod"). WC pricing depends heavily on the employer's experience mod — a ratio comparing the business's actual loss history against the industry average for its class code. A mod of 1.00 is industry-average; below 1.00 is better than average; above 1.00 is worse. Mods are calculated by NCCI (National Council on Compensation Insurance) for most states; independent bureaus in California and a handful of other states. Businesses with strong safety programs see mods drop over time, which directly reduces WC premium.

Cost and how to buy workers' compensation

For full cost analysis with industry breakdowns, top carriers by published starting price, and 2026 benchmark data, see our workers' compensation insurance cost guide.

Marketplace cost data. Insureon's aggregated data shows small businesses pay a median of $54/month for workers' comp, with the full premium range spanning $300 to over $5,000 per year depending on industry class code, state, and payroll.³ Unlike GL, where premium is flat-fee, WC is payroll-based — the premium is calculated as a rate per $100 of payroll, multiplied by the employer's experience mod.

What drives WC price:

• Industry class code (NCCI or state classification). The single biggest cost driver. A clerical office worker (class code 8810) may be rated at $0.15 per $100 payroll; a roofer (class code 5551) at $8.00 or more per $100 payroll — a 50x difference.
• State. WC rates vary dramatically across states. Insureon's state comparison shows premiums can vary by a factor of 3-5x across states for the same class code.²
• Payroll. Higher payroll means higher premium, scaling linearly within class.
• Experience mod. Loss-affected businesses pay more; clean-loss businesses pay less.
• Safety programs. Many states offer premium discounts for qualifying safety programs (written safety manual, regular training, drug-free workplace certification).

Pay-as-you-go billing. Traditional WC policies estimate annual payroll at binding, charge the full estimated premium across the year, then audit at renewal — producing either an audit bill (if actual payroll exceeded estimate) or refund. Pay-as-you-go WC ties premium to actual reported monthly payroll, eliminating the year-end audit surprise. Pie Insurance was built around the pay-as-you-go model; NEXT, The Hartford, and Travelers also offer it.⁸

Carrier pricing floors (carrier-advertised starting premiums):

• NEXT Insurance — from $14/mo for low-risk micro classes on A+ (Superior) paper; native commercial auto and GL available on the same carrier.⁸
• Pie Insurance — payroll-percentage rates ranging approximately $0.57/$100 payroll (TX) to $2.32/$100 payroll (AK) by class code and state; pay-as-you-go model.⁹
• biBerk — no publicly advertised WC starting price; native WC on Berkshire Hathaway Direct Insurance Company paper (NAIC 10391, A++).
• The Hartford — published WC average $86/mo across small-business book on A+ paper.¹⁰
• Travelers Small Business — Insureon-reported median ~$45/mo on A++ paper; available in 44 states plus DC.¹¹
• Simply Business — broker-aggregator; panel includes Cerity (WC specialist) and Travelers; starting price not publicly published.

Three paths to placement:

1. Direct-to-carrier. Pie, NEXT, biBerk, Hartford, and Travelers accept direct small-business WC placements. Best for standard class codes and typical SMB profiles.¹²
2. Broker-aggregator. Simply Business places WC across a panel including Cerity, Travelers, and others. Best for buyers who want comparison quotes.
3. Traditional agent — non-standard operations (high-hazard construction, specialty manufacturing, unusual loss history) often place better through an agent with access to NCCI-regulated and state-fund relationships.

What underwriters evaluate: business entity type, state, full list of operations with class-code-level detail, total annual payroll (estimated current and projected), employee count and roles, prior 3-5 years of WC claims history, owner-inclusion status, safety program detail, subcontractor use.

State-by-state requirements for workers' compensation

WC requirements vary more than any other commercial line. The variance falls into four structural patterns:

Monopolistic states (ND, OH, WA, WY)

Four states prohibit private carriers from writing workers' comp; coverage must be purchased from the state fund.⁷

• North Dakota — Workforce Safety and Insurance (WSI) is the exclusive WC provider. Private carriers cannot write WC in ND.¹³
• Ohio — the Ohio Bureau of Workers' Compensation (BWC) is the exclusive WC provider for state-fund classes, though Ohio does allow qualified self-insurance for large employers.¹⁴
• Washington — Washington Labor & Industries (L&I) is the state fund; L&I provides coverage directly, though large employers can self-insure.¹⁵
• Wyoming — Wyoming Workers' Compensation administered by the Department of Workforce Services.¹⁶

Employers in monopolistic states need to add Stop Gap employer's liability coverage to their general liability policy — the state-fund WC does not include employer's liability, and the gap is filled through the GL endorsement.

Texas non-subscriber option

Texas is the only state where private employers can legally operate without workers' comp coverage.⁵ Non-subscribers must:

• Provide written notice to employees that the employer has opted out.
• File notice with the Texas Department of Insurance Division of Workers' Compensation.
• Accept the loss of statutory tort immunity — injured employees can sue for negligence, including contributory fault arguments that the workers' comp statute would otherwise bar.

Large Texas employers sometimes opt out and self-fund a company-designed occupational injury plan; small employers more often carry standard WC for the tort-immunity protection.

Statutory disability-insurance states (NY, NJ, HI, RI, CA TDI, MA PFML)

Five states (plus California's TDI and Massachusetts's PFML program) require employers to carry a statutory disability insurance benefit separate from or in addition to workers' comp, covering non-work-related short-term disability:¹⁷

• New York — Disability Benefits Law (DBL) + Paid Family Leave (PFL), both administered through the New York State Workers' Compensation Board and DFS.¹⁸
• New Jersey — Temporary Disability Insurance (TDI) through the state DOL.
• Hawaii — Temporary Disability Insurance administered through the Department of Labor.¹⁹
• Rhode Island — Temporary Disability Insurance (TDI) and Temporary Caregiver Insurance (TCI).²⁰
• Massachusetts — Paid Family and Medical Leave (PFML).

These statutory disability programs are separate products from WC, though often bundled by the same carrier. Employers in these states need both WC and the statutory disability program to comply.

Private-market states (the remaining 41)

In the 41 states not in the above categories, employers can buy WC from:

• Private commercial carriers — NEXT, Pie, biBerk, Hartford, Travelers, and others.
• State competitive funds — states like California (State Compensation Insurance Fund), Colorado (Pinnacol Assurance), Maryland (Chesapeake Employers), and others operate a state-chartered WC carrier that competes alongside private carriers.
• Qualified self-insurance — large employers with demonstrated financial capacity can self-insure WC under state oversight.

Most small businesses in these states buy WC from a private carrier. State competitive funds often serve as the residual market for businesses that can't place WC through private carriers (high-hazard classes, loss-affected risks).

Frequently asked questions

Is workers' compensation legally required?

In 49 of 50 states, yes. Texas is the sole state where private employers can legally opt out as "non-subscribers" but forfeit statutory tort immunity and expose the business to negligence lawsuits from injured employees.⁵ In the 49 WC-required states, employee-count thresholds vary — California and New York require coverage from the first employee, while Alabama, Mississippi, and Missouri require it at 5 employees.²

How much does workers' compensation cost?

Insureon's small-business data shows a median cost of $54/month with annual premiums ranging $300 to over $5,000 depending on industry class code, state, and payroll.³ WC is payroll-based — the premium is calculated as a rate per $100 of payroll, multiplied by the employer's experience mod. Rates vary 50x or more across class codes (clerical at ~$0.15/$100 payroll vs. roofers at $8.00+/$100 payroll).

What are the four monopolistic workers' comp states?

North Dakota, Ohio, Washington, and Wyoming. In all four, WC coverage must be purchased from the state fund — private carriers cannot write WC in these states.⁷ Employers in monopolistic states need to add Stop Gap employer's liability coverage to their GL policy because state-fund WC doesn't include it.

Can I opt out of workers' compensation in Texas?

Yes — Texas is the only state that allows private employers to be "non-subscribers" to the state WC system.⁵ Non-subscribers provide written notice to employees and file notice with the Texas Department of Insurance, and they lose the tort-immunity protection WC provides. Injured employees can sue non-subscriber employers for negligence, including arguments the WC statute would otherwise bar. Large employers sometimes opt out and self-fund occupational injury plans; small employers typically stay subscribers for the tort protection.

What's the difference between workers' comp and disability insurance?

Workers' comp covers injuries and illnesses caused by work. Disability insurance — short-term or long-term — covers non-work-caused medical conditions that prevent the employee from working. Five states (NY, NJ, HI, RI, MA) require employers to provide statutory short-term disability coverage separate from WC.¹⁸¹⁹²⁰

Does workers' comp cover independent contractors?

Generally no. Genuine independent contractors aren't "employees" for WC purposes and aren't covered under the hiring business's WC policy. However, state labor departments regularly audit worker classification; if a state determines a "contractor" is actually an employee, the hiring business owes back premiums and may face penalties. Businesses using contractor-heavy staffing models should verify classification compliance with state rules.

What does the experience mod mean for my WC premium?

The experience mod is a multiplier on the standard WC rate for the business's class code. A mod of 1.00 means industry-average claims; 0.85 means 15% better than average (lower premium); 1.20 means 20% worse than average (higher premium). Mods are calculated based on actual loss history relative to class-code benchmarks. Businesses with strong safety programs typically see mods drop over time, directly reducing premium.

How do pay-as-you-go workers' comp policies work?

Pay-as-you-go WC ties premium to actual monthly reported payroll rather than estimated annual payroll. Traditional WC estimates payroll upfront and audits at renewal, producing audit bills or refunds; pay-as-you-go eliminates the annual surprise by matching premium to actual exposure month-by-month. Pie Insurance was built around the pay-as-you-go model; NEXT, Hartford, and Travelers also offer it.⁸

Can I buy workers' comp without a broker?

Yes. Pie, NEXT, biBerk, Hartford, and Travelers all accept direct small-business WC placements through their websites for standard class codes. Non-standard operations (high-hazard construction, specialty manufacturing, unusual loss history) often place better through a broker or agent with access to a wider market.

Related policies

Workers' comp sits alongside several related coverages:

• Employment practices liability (EPLI) — covers wrongful termination, discrimination, and harassment claims (which WC does not).
• General liability — covers third-party injuries (which WC does not — WC is employees only).
• Business owner's policy (BOP) — bundles GL with property but does not include WC; WC is always a separate policy.
• Commercial auto insurance — covers auto-related injuries to drivers and passengers; WC covers employees injured while driving on the job, but liability to third parties from the same accident is commercial-auto territory.

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Citations

1. Types Of Policies — Commercial Insurance — https://www.iii.org/publications/commercial-insurance/what-it-does/types-of-policies ↩ ↩² ↩³

2. Compare Workers' Comp Rates by State — https://www.insureon.com/blog/compare-workers-comp-rates-by-state ↩ ↩² ↩³ ↩⁴

3. Workers' Compensation Insurance Cost — https://www.insureon.com/small-business-insurance/workers-compensation/cost ↩ ↩² ↩³

4. Travelers 2024 Injury Impact Report — https://www.travelers.com/resources/business-topics/workplace-safety/injury-impact-report ↩

5. Texas Department of Insurance — Workers' Compensation Employer Resources — https://www.tdi.texas.gov/wc/employer/ ↩ ↩² ↩³ ↩⁴

6. Workers' Compensation Insurance — https://www.insureon.com/small-business-insurance/workers-compensation ↩

7. Monopolistic Workers' Compensation States — https://www.insureon.com/small-business-insurance/workers-compensation/monopolistic-workers-comp-states ↩ ↩² ↩³

8. NEXT Workers' Comp Insurance Cost — https://www.nextinsurance.com/workers-compensation-insurance/cost/ ↩ ↩² ↩³

9. Pie Insurance — Workers Compensation Coverage by State — https://www.pieinsurance.com/agency/states-we-serve ↩

10. The Hartford — How Much Is Business Insurance — https://www.thehartford.com/business-insurance/how-much-business-insurance-cost ↩

11. Travelers — Workers Comp by State — https://www.travelers.com/business-insurance/workers-compensation/state ↩

12. Best Workers' Comp Insurance Companies — https://www.insureon.com/small-business-insurance/workers-compensation/best-companies ↩

13. North Dakota Workforce Safety and Insurance - Employers — https://www.workforcesafety.com/employers ↩

14. Ohio Bureau of Workers Compensation - Employers — https://info.bwc.ohio.gov/for-employers ↩

15. Washington L&I - Do I Need a Workers Comp Account — https://lni.wa.gov/insurance/insurance-requirements/do-i-need-a-workers-comp-account/ ↩

16. Wyoming Workers Compensation - Employers — https://dws.wyo.gov/dws-division/workers-compensation/employers/ ↩

17. New York State Department of Financial Services — https://www.dfs.ny.gov ↩

18. New York Paid Family Leave - Employers — https://paidfamilyleave.ny.gov/employers ↩ ↩²

19. Hawaii Temporary Disability Insurance (TDI) overview — https://labor.hawaii.gov/dcd/home/about-tdi/ ↩ ↩²

20. Rhode Island TDI and TCI — https://dlt.ri.gov/individuals/temporary-disability-caregiver-insurance ↩ ↩²

Top carriers

Compare top workers' compensation insurance carriers

Recommended carriers for this coverage, ranked against our 6-dimension methodology.

Sub-threshold = fewer than 20 NAIC complaints in 3 years (data is too sparse to score reliably). N/A (broker) = not a carrier. See full methodology →

Carrier	Our score	Positioning	Starting price	Coverage	Claims	AM Best	NAIC index	States	Quote channel
Editor's pick	7.6	Workers comp specialist	—	8.0/10	7.5/10	A-	Sub-threshold	39 states	Direct online
	7.9	Single-carrier program for SMBs	GL $68/mo	9.0/10	8.0/10	A+	Sub-threshold	50 states	Direct online
	8.1	Broad-ladder primary carrier	GL $42/mo	9.0/10	8.0/10	A++	Sub-threshold	50 states	Direct online
	7.8	Digital-native micro-business	Cyber $4/mo	7.0/10	7.5/10	A+	Sub-threshold	50 states	Direct online
	7.2	Berkshire-backed contractual umbrella	GL $28/mo	8.0/10	8.0/10	A++	13.25	50 states	Direct online
	8.1	Broker comparing 8+ carriers	GL $21/mo	8.5/10	7.5/10	—	N/A (broker)	50 states	Broker portal

About complaint index data: Values are 3-year averages from NAIC Consumer Information Source for commercial liability. Carriers with fewer than 20 complaints in the 3-year window are labeled "sub-threshold". A reliability call about data volume, not a finding about the carrier. Brokers (Category D) are structurally N/A. See our complete methodology.

• Editor's pick
  
  7.6

  Positioning

  Workers comp specialist

  Starting price

  —

  Coverage

  8.0/10

  Claims

  7.5/10

  AM Best

  A-

  NAIC index

  Sub-threshold

  States

  39 states

  Quote channel

  Direct online

• 
  7.9

  Positioning

  Single-carrier program for SMBs

  Starting price

  GL $68/mo

  Coverage

  9.0/10

  Claims

  8.0/10

  AM Best

  A+

  NAIC index

  Sub-threshold

  States

  50 states

  Quote channel

  Direct online

• 
  8.1

  Positioning

  Broad-ladder primary carrier

  Starting price

  GL $42/mo

  Coverage

  9.0/10

  Claims

  8.0/10

  AM Best

  A++

  NAIC index

  Sub-threshold

  States

  50 states

  Quote channel

  Direct online

• 
  7.8

  Positioning

  Digital-native micro-business

  Starting price

  Cyber $4/mo

  Coverage

  7.0/10

  Claims

  7.5/10

  AM Best

  A+

  NAIC index

  Sub-threshold

  States

  50 states

  Quote channel

  Direct online

• 
  7.2

  Positioning

  Berkshire-backed contractual umbrella

  Starting price

  GL $28/mo

  Coverage

  8.0/10

  Claims

  8.0/10

  AM Best

  A++

  NAIC index

  13.25

  States

  50 states

  Quote channel

  Direct online

• 
  8.1

  Positioning

  Broker comparing 8+ carriers

  Starting price

  GL $21/mo

  Coverage

  8.5/10

  Claims

  7.5/10

  AM Best

  —

  NAIC index

  N/A (broker)

  States

  50 states

  Quote channel

  Broker portal

Full per-carrier analysis lives in each carrier review. See our scoring methodology for how we weight the dimensions above.