How Much Is Workers’ Comp Insurance?
Workers' compensation premiums for small businesses depend on several factors, but some are within your control.
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Updated · 5 min read
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Senior Editor & Content Strategist Annual premiums for workers' compensation insurance can cost a small business anywhere from a few hundred dollars to a few thousand dollars per $100,000 in payroll, depending on factors like the business’s industry, location and claims history.
While your final cost for workers’ compensation insurance is up to experienced actuaries, understanding how it is calculated can simplify the insurance process for your small business — and save you money along the way.
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What affects the cost of workers' comp?
Multiple factors go into calculating business insurance premiums. Here are the most common considerations for workers’ compensation insurance.
State requirements
Many states have specific requirements for when a business must provide workers’ compensation insurance to employees. Some require coverage with just one employee, while others don’t require it until a business hires five or more people.
Some states have requirements for which types of employees you have to cover. For example, California requires all employees to receive workers’ comp benefits . In states where there is a distinction between which types of employees must be covered, your employees’ classifications can directly affect your workers’ compensation premiums.
Type of work/industry
Industries with a higher risk of injury have higher premiums.
Some industries are inherently riskier. You're more likely to get injured doing commercial fishing than doing data entry. For that reason, certain types of businesses will always have higher premiums than others.
Here are the median workers' comp premiums for businesses based on their industry, according to 2026 data online insurance broker Coverdash shared with NerdWallet:
| Industry | Median workers' comp premium |
|---|---|
| Department stores | $1,200 per year. |
| Full-service restaurants | $1,600 per year. |
| Pre-seed startups | $2,000 per year. |
| Fitness centers and gyms | $2,500 per year. |
| Janitorial services | $2,500 per year. |
| Remodeling and home renovation | $3,200 per year. |
| Residential plumbing | $4,800 per year. |
| Landscaping services | $4,000 per year. |
| Terrazzo and tile refinishing | $6,500 per year. |
| Driveway paving and sealing | $7,000 per year. |
| Large drywall contractors | $10,000 per year. |
| Commercial or large residential roofing contractors | $12,000 per year or more. |
Insurance companies assign each industry a classification code based on its type of work. Farming, for instance, can be broken up into multiple industries based on the final products, each with its own risks.
For each of these codes, the National Council on Compensation Insurance analyzes historical data to determine the average cost of each industry’s workers’ compensation claims in each state. This allows insurance agencies to determine the financial risk of a business’s industry, which is represented as a rate per $100 of payroll. For example, if pet sitting has a rate of $2.19, that means an insurer can expect to lose that much in workers’ compensation claims for every $100 a pet-sitting business pays its employees.
But it isn’t always straightforward. Industry rates can become more complicated for businesses that hire employees to perform different types of work. A pest control company, for example, might hire four employees to treat residential areas but also have two clerical employees in the office to handle the paperwork.
If the pest control company is based in Georgia, the four employees that spray yards will be rated around $2.82 for every $100 of payroll. However, because the office staff has much less risk when it comes to potential workplace injuries, these two employees will be rated only around 8 cents for every $100 of payroll. This not only allows insurers to more comprehensively assess a small business’s risk but it also fairly prices workers’ compensation premiums.
Additionally, some states use their own industry rates instead of the NCCI rates, which creates even more variety among industry rates — and premiums — between states .
Additional workplace activities
Driving to job sites and other additional activities can raise premiums.
If employees are doing additional activities that can increase their risk of a workplace injury, this can mean higher workers’ compensation premiums. This is especially relevant for businesses where employees drive to worksites, since crashes can cause workers' comp claims.
Size of payroll
More employees means more risk and higher premiums.
The more employees, the more potential exposure to workplace injuries. It makes sense then that the more employees a business has, the higher its premium will be.
Payroll also affects premiums with respect to wages. If an employee is unable to report to their job because of a workplace injury, workers’ comp insurance can pay the employee for lost wages. How much an employee can receive as part of lost wage replacement is a matter of state requirements and the employee’s current pay rate, which means higher salaries can lead to higher losses for insurance companies.
Claims history
Because of how workers' compensation works, past claims will probably make your premiums more expensive.
Insurance providers also look at a business’s risk as an individual company by calculating its experience modification rate, or EMR. An EMR looks at how many previous workers’ comp claims a business has and how severe they were in terms of cost, then quantifies those in terms of risk.
But claim frequency doesn't communicate the same risk to insurance companies as the severity of previous claims. Because multiple workers’ compensation claims indicate a less safe workplace, a high number of workers’ comp claims can impact your premiums, even if they were for small payouts.
Save up to 30% on business insurance
NerdWallet Small Business helps you get real-time quotes from 30+ insurers, and instant access to your Certificate of Insurance (COI) through our partner, Coverdash.
Where is workers comp most expensive?
Coverdash, an online insurance broker, provided workers' comp insurance cost data to NerdWallet in 2026. The highest-premium states were:
- New Jersey: 180% above median premiums.
- Pennsylvania: 180% above median premiums.
- Wisconsin: 175% above median premiums.
- Oklahoma: 100% above median premiums.
- Kentucky: 95% above median premiums.
How can you save on workers' comp?
A business's industry determines a good deal of workers’ compensation premiums. But there are ways a business can lower its premiums and reduce the cost of workers’ compensation insurance.
Promote a safe culture
Creating an environment that focuses on safety has the potential to save a small business money in two ways. Some insurers consider a business’s culture and how an employer promotes safety with training and programs. Not only can this save a business on its initial premium by showing an initiative toward employee health, but by emphasizing safety with employees a business also lessens the likelihood of preventable job injuries.
Confirm payroll
A business can avoid overpaying on premiums by verifying its employees’ job descriptions and classifications and ensuring that it provides accurate information to pay the right premium for the right coverage. Most insurers will perform an audit at the end of the year to verify you didn’t overpay, but you can save yourself money and trouble throughout the year by updating your insurer about any payroll changes to ensure your premium is always accurate.
Help injured employees return to work
Employees who suffer a workplace injury cannot return to work before they are cleared medically, but there are things a business can do to help an injured employee return to work.
Report workers’ compensation injuries as soon as possible and assist affected employees in receiving the right treatment, Kipust says. Look for how you can accommodate an injured employee to allow them to return to reduce a prolonged workers’ comp claim and help your premiums in the long run.
Ask to pay as you go
Some insurers now offer pay-as-you-go options to keep small businesses from estimating their payroll for the year and potentially overpaying throughout the year. A pay-as-you-go option also allows businesses to break up annual premiums into smaller payments for a more cash flow-friendly method.
Shop around
If you're purchasing workers' comp from a private insurance company, compare quotes from several providers. This will help you find the best workers' compensation coverage for your business at the most affordable rate.
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- 1. California Department of Industrial Relations. Answers to frequently asked questions about workers' compensation for employers. Accessed Feb 20, 2026.
- 2. National Council on Compensation Insurance. NCCI State Map. Accessed Feb 20, 2026.
