Purchasing workers' compensation insurance, commonly called workers’ comp, requires several key steps. You must check your state's requirements, determine the necessary coverage, identify employee class codes, obtain quotes and compare options before purchasing. By following these steps, you can ensure you choose the best policy for your needs.
How and Where to Get Workers' Compensation Insurance
Updated: November 1, 2024
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How to Get Workers’ Compensation Insurance
The specific process to get workers’ compensation insurance may vary greatly depending on location. However, while each state has its regulations, you can follow a few general steps to get the best workers' comp insurance for your small business.
- 1
Check your state’s workers’ comp requirements
Each state has specific requirements for workers' compensation insurance. Some states require coverage for all businesses, while others have different rules based on the number of employees or the industry. Familiarize yourself with your state's workers' compensation insurance requirements to ensure compliance and avoid potential fines or legal issues.
- 2
Find your employee class code
Employee class codes are essential for determining your workers' compensation insurance rates. These codes categorize your employees' work, helping insurance companies assess the risk associated with each job. For example, a contractor would have a different class code than an office worker, reflecting the higher risk of injury in construction.
You can find your employee class codes through your insurance provider or the National Council on Compensation Insurance (NCCI) lookup tool.
- 3
Determine how much coverage you need
Liability limits are another crucial consideration when getting workers' comp for your business. Typically, business owners can choose how much coverage to get. However, they must meet state requirements.
Workers' compensation policies have two parts:
- Part A (Employee benefits): Designed by the insurance provider, this part of the policy refers to what employees are entitled to receive in case of a claim.
- Part B (Employer liability): This coverage is for the business. It provides financial protection should an injured or sick employee pursue a lawsuit or additional claims against the employer.
- 4
Gather necessary information
Before obtaining a workers' compensation insurance quote, prepare detailed information about your business to ensure accurate coverage and suitable rates. You will typically need:
- Business name
- Number of employees
- Payroll amount
- Type of work
- Coverage levels
- Claims history, if applicable
Insurance companies and brokers may also ask for proof of financial stability, such as financial reports. Having this information ready will streamline the quote process.
- 5
Shop around
Depending on where your business is located, you may be able to get workers’ comp insurance from a private insurer. In such a case, it’s best to check out the companies offering coverage to get your business' best workers' compensation insurance policy.
Visit the insurance providers’ websites to see if you can get a quote online. Many workers' comp insurance companies offer online quote tools, typically taking minutes to complete. Some companies, however, may want you to call, email or visit their physical location. We recommend getting multiple quotes to compare workers' compensation insurance costs and coverage options.
- 6
Review and purchase your selected policy
Carefully review the policy details, including coverage limits, deductibles and exclusions. While affordable workers’ comp insurance is tempting, it’s crucial to ensure that the policy accurately reflects your employee class codes and other relevant business information to avoid any issues with claims in the future.
Once satisfied with the policy, complete the purchase by signing the necessary documents and arranging for payment. Keep a copy of the workers' compensation insurance certificate, which serves as proof of coverage and may be required for compliance. Regularly review your workers' compensation coverage to ensure it continues to meet your business needs, making adjustments as necessary.
Where to Buy Workers’ Compensation Insurance
States also regulate workers’ comp insurance providers. The most common sources of policies include private insurance companies, state funds, agents and brokers.
Private insurance companies
Most states' workers’ comp insurance systems allow businesses to purchase policies from private business insurance companies, such as The Hartford and Nationwide. Employers pay premiums, which may be calculated differently per insurer. The companies also decide whether to provide insurance to a business or reject its application. That said, the state agency in charge will still oversee the program.
Competitive state workers’ comp fund
States with competitive state funds allow employers to choose whether to get coverage through a state fund or a private insurance provider, thus providing more options.
Monopolistic state workers’ comp fund
States with this type of program only allow businesses to get workers’ compensation insurance through a state fund. Monopolistic funds exist in four states: North Dakota, Ohio, Washington and Wyoming. This means employers from these states can’t purchase policies from private insurance carriers.
Insurance agents or brokers
In states where you can purchase from private insurance companies, you may also opt to get a policy from an agent or broker. These are people who sell policies on behalf of insurance companies.
State Funds vs. Private Insurers
Whether you choose state funds or private insurers depends on your business's specific needs and circumstances. High-risk businesses or those struggling to find coverage might benefit from the guaranteed availability of state funds. Conversely, businesses seeking tailored coverage and competitive pricing may prefer private insurers.
State Funds
State funds are government-operated entities providing workers' compensation insurance. They typically offer coverage to businesses needing help obtaining insurance due to high-risk classifications or previous claims. State funds can be more accessible for new or high-risk companies.
Advantages of state funds include:
- Guaranteed coverage: State funds must provide insurance to any eligible business, 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.
However, state funds may also have drawbacks:
- Limited options: State funds may offer fewer coverage options than private insurers.
- Less competitive rates: Without the competition, state funds might have higher premiums.
Private Insurers
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 specific needs.
Advantages of private insurers include:
- 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.
However, private insurers may have stricter underwriting standards, making it more challenging for high-risk businesses to obtain coverage.
FAQ About Getting Workers’ Compensation Insurance
Getting workers’ compensation insurance provides employee and employer protection. MoneyGeek answered some frequently asked questions to help you find the right policy.
How can I get workers’ compensation insurance?
Regulations and requirements for workers’ comp insurance may vary per state. However, there are six general steps business owners can take. You can start by checking state requirements, finding your employee class code, determining the right coverage amount and shopping around.
Where can I find workers’ compensation insurance?
You can get workers’ compensation insurance from private insurance companies, state funds and insurance agents. The availability of options depends on whether your state has a monopolistic or competitive state fund. Monopolistic states only allow businesses to get coverage through a state fund, while those with competitive state funds let employers buy from private companies or agents.
Do I need workers’ compensation insurance for my business?
Workers’ compensation insurance is regulated at the state level. That means requirements depend on the location. In most states, employers must have coverage in place.
About Mark Fitzpatrick
Mark Fitzpatrick, a Licensed Property and Casualty Insurance Producer, is MoneyGeek's resident Personal Finance Expert. With over five years of experience analyzing the insurance market, he conducts original research and creates tailored content for all types of buyers. His insights have been featured in publications like CNBC, NBC News and Mashable.
Fitzpatrick holds a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He's also a five-time Jeopardy champion!
Passionate about economics and insurance, he aims to promote transparency in financial topics and empower others to make confident money decisions.
sources
- National Council on Compensation Insurance. "Class Look-Up." Accessed July 4, 2024.