How to Get Workers' Compensation Insurance

Based on our analysis of coverage options, customer service ratings, quotes and business resources, The Hartford is the best workers' compensation insurance provider for different business needs.

For most industries and states, a workers' comp insurance policy can be obtained from a digital insurer in 30 minutes. Monopolistic state applications will take up to two weeks. Below are the timelines for each step in the process.

• Online quotes: Can be generated within minutes for straightforward businesses
• Online policy purchase: NEXT, The Hartford and other digital insurers allow you to buy your policy online within minutes for most industries.
• Policy activation: Most policies activate within 24 hours or less after approval.
• Complex operations: May require days or a week for proper classification and underwriting
• State fund applications: Processing takes one to two weeks in North Dakota, Washington, Wyoming and Ohio.

Start the application process well before your coverage needs begin to avoid gaps in protection.

Understanding your state's specific requirements helps maintain compliance and avoid penalties.

General Requirements

Workers' compensation insurance is mandatory in 48 states. Texas and South Dakota remain the only exceptions.

Each state sets different requirements:

• Employee count thresholds
• Industry-specific mandates
• Part-time worker provisions
• Owner and officer exemptions

Workers' compensation coverage requirements and penalties vary by state.

Employee Count Thresholds:

• One or more employees: Most states (including California, Florida and New York)
• Three or more employees: Arkansas and New Mexico
• Four or more employees: Michigan and South Carolina
• Five or more employees: Alabama, Mississippi and Missouri

Industries Requiring Coverage From the First Employee:

• Construction and building trades
• Manufacturing and industrial operations
• Transportation companies
• Health care facilities
• Restaurants and food service

Your business location and risk profile determine which option works best. State funds guarantee coverage for high-risk businesses that private insurers reject. Private insurers offer more coverage options and potentially lower rates for standard-risk businesses.

State funds are government-operated workers' compensation insurers. These programs provide coverage to businesses that private insurers reject due to high-risk classifications or claims history. New businesses and high-risk industries often rely on state funds for guaranteed access to coverage.

Advantages of State Funds:

• Guaranteed coverage for all eligible businesses, regardless of risk level
• Government backing provides financial stability
• Standardized rates simplify budget planning

Disadvantages of State Funds:

• Fewer coverage options compared to private insurers
• Higher premiums due to lack of competition

Private insurers are commercial companies that sell workers' compensation insurance with varied policy options and pricing. Businesses can compare multiple carriers to find coverage matching their specific needs and budget.

Advantages of Private Insurers:

• Flexible, customizable policies
• Competitive pricing through market competition
• Additional services, including risk management and safety programs

Disadvantages of Private Insurers:

• Stricter underwriting standards exclude high-risk businesses

Understanding how premiums are calculated helps you budget accurately and identify cost-saving opportunities. The cost of workers' comp insurance is based on your employee payroll, industry classification and claims history.

Basic Cost Formula

Insurance Premium Cost = Class code rate x (Annual payroll/$100) x EMR

Definitions:

• Classification rate: The premium rate is expressed as dollars and cents per $100 of payroll for each class code. Higher-risk jobs have higher rates.
• Payroll: Base your annual payroll amount on the gross wages of your employees. Insurance companies use your payroll total before deducting taxes to determine your premiums.
• Experience modification rate (EMR): Your experience modifier numerically represents your company's claims history.

Example: A construction company with $500,000 in annual payroll, an EMR of 1.0 and a class code rate of $2.38 would have the following cost calculation: $2.38 x ($500,000/$100) x 1.0 = $11,900.

You can't control your industry risk level or payroll amounts, but you can manage your workers' compensation costs effectively. Finding the most affordable workers' comp coverage involves comparing providers and keeping your claims history clean.

Getting workers' compensation insurance provides employee and employer protection. Here are frequently asked questions to help you get a workers' comp policy.