Workers' Comp Insurance

Workers' comp guarantees medical care and partial wage replacement when employees get hurt or sick at work. It's required in nearly every state, protects employees regardless of who caused the injury, and shields your business from most workplace injury lawsuits by making workers' comp benefits the employee's only remedy.

A standard workers' comp policy includes three main coverage parts:

• Workers' Compensation Insurance (Part A): Pays all state-required benefits for work-related injuries and illnesses: medical treatment, wage replacement at roughly two-thirds of average weekly wages, rehabilitation and death benefits for dependents. No dollar limit applies. Your state's law sets the benefits, not your policy.
• Employers' Liability Insurance (Part B): Pays legal costs when an employee or family member sues in situations workers' comp doesn't cover: third-party claims, intentional harm allegations or a spouse suing for loss of support. Dollar limits apply and you set them when you buy the policy.
• Other States Insurance (Part C): Extends your coverage when employees work in states not listed on your policy. Without it, out-of-state work can leave you uninsured.

The following sections start with whether your state requires coverage and what you'll pay:

Workers' comp is often confused with other business coverages because many protect against employee-related risks. For example, business owners sometimes assume their health insurance will cover an employee's broken arm from a warehouse accident, or that their general liability policy handles workers' comp claims. 

Use the comparison below to avoid buying the wrong coverage, leaving gaps in protection, or paying twice for overlapping benefits.

Whether you need workers' comp depends on your state's laws (most require it once you hire your first employee, though some set higher thresholds) and contractual requirements from clients or landlords. 

Your business likely needs workers' comp if you:

• Have employees on payroll: Most states require coverage before your first W-2 employee's first day, full-time or part-time.
• Hire seasonal or temporary workers: Short-term hires count as employees in most states.
• Use subcontractors or 1099 workers: Rules vary by state. Misclassifying employees as contractors can trigger penalties and retroactive premium charges.
• Work in high-risk industries: Construction, manufacturing and healthcare often have stricter requirements or lower employee thresholds.
• Need to meet contract requirements: Clients, general contractors and property owners require proof of workers' comp before work starts.
• Lease commercial space: Landlords require workers' comp documentation in lease agreements, even when your state doesn't mandate coverage.

To figure out whether workers' comp applies to your business, explore these resources:

• Do I Need Workers' Comp Insurance?
• What Are Workers' Comp Insurance Requirements?

The cost of workers' comp insurance averages $113 per employee per month (or about $1,354 annually) for businesses with one to four employees. Your actual cost depends on your industry, payroll, claims history, location and the types of work your employees perform.

Cost is primarily influenced by the following factors:

Now that you know that workers' comp coverage is required and what it costs, get it in place before deadlines hit. Missing them means fines, contract violations or operating illegally. Familiarize yourself with how to get workers' comp insurance:

You need workers' comp coverage, but your specific situation determines what you should focus on first. You might be hiring your first employee and need coverage fast, comparing insurers to find better rates, or trying to figure out if your existing policy has the right endorsements. The guidance below helps you take the right next step based on where you are.

Ready to compare workers' comp insurance quotes? MoneyGeek matches you to providers that specialize in your industry. Use our tool: