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' comp 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

In the United States, 48 of the 50 states require workers' compensation insurance. Texas and South Dakota are the only ones that don't require coverage.

Requirements vary by state based on:

• Minimum number of employees
• Industry-specific rules
• Coverage for part-time workers
• Owner and officer exemptions

Workers' compensation laws differ across states, affecting coverage requirements and penalties.

Typical 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 That Typically Require Coverage With One Employee:

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

The choice between state funds and private insurance companies depends on your business's specific needs and location. High-risk businesses or those struggling to find coverage can benefit from the guaranteed availability of state funds, while businesses seeking specific coverage and competitive pricing may prefer private insurers.

State funds are government-operated entities providing workers' compensation insurance. They offer coverage to businesses that need help obtaining insurance due to high-risk classifications or previous claims, making them more accessible for new or high-risk companies.

Advantages of State Funds:

• Guaranteed coverage: State funds must provide insurance to eligible businesses, regardless of risk level.
• Stability: State funds are often more stable and backed by the government.
• Standard rates: Workers' compensation insurance rates may be more standardized, providing predictability for budgeting.

Disadvantages of State Funds:

• Limited options: State funds may offer fewer coverage options than private insurers.
• Less competitive rates: Without competition, state funds can have higher premiums.

Private insurers are commercial companies offering workers' compensation insurance. They provide a range of policy options and pricing, allowing businesses to find coverage tailored to their needs.

Advantages of Private Insurers:

• Customization: Private insurers offer more flexible and customizable policies.
• Competitive rates: Market competition can lead to more competitive pricing.
• Additional services: Many private insurers provide extra services like risk management and safety programs.

Disadvantages of Private Insurers:

• Stricter underwriting standards: This makes it harder for high-risk businesses to obtain coverage.

Understanding how premiums are calculated helps you budget accurately and identify cost-saving opportunities. At a high level, your workers' comp cost 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.

While you can't control your industry risk level or payroll amounts to lower costs, you can take actions to manage your workers' compensation costs effectively. The main areas where businesses have control are their claims history and finding the best value through shopping.

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