Workers’ Compensation Insurance: How It Works, Where to Get It
Workers' compensation insurance protects your employees and your business when someone is injured on the job.
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Workers’ compensation insurance covers your business when an employee is injured on the job. It pays for the injured employee’s medical expenses and a portion of their lost pay while they recover. It also usually shields your company from lawsuits related to the injuries.
Most companies are required by law to have workers’ comp. You can review your state’s requirements here.
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Best workers’ comp companies
Not every business can buy workers’ comp through a private insurance company. (Learn more about how to get coverage.) If you can, here are our top choices.The NerdWallet editorial team chooses the best business insurance based on many factors. For workers’ compensation policies, we focused on companies that:
- Get relatively few complaints to state regulators about their workers’ comp coverage.
- Get high financial strength ratings from credit rating agencies, which should mean they have enough money to pay out all their claims.
- Offer risk management consulting to help you avoid claims.
Not every company sells workers’ comp — USAA and Hiscox don’t, for instance. Because of that, we don’t factor complaints about workers’ comp into our overall star ratings for business insurance companies. Instead, we include complaint data for general liability and commercial property insurance, which are more universal.
That’s why some companies on this list, like Erie, have lower star ratings than others. We included them because of their workers’ comp complaint ratios, not their overall performance.
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Cincinnati Insurance
Best overall workers' comp insurer
We already give Cincinnati Insurance high marks for its financial strength and few customer complaints. But the company also had far fewer complaints about workers’ comp than expected given its market share. Cincinnati will help your company create a plan for the injured employee’s return to work as well. You’ll need to work with a local insurance agent to get coverage. We haven’t written a review of Cincinnati business insurance yet.
Chubb
Best for: Buying workers' comp online
Chubb got more complaints about workers’ comp than we’d expect given its market share. But it had the best scores of the companies that sell workers’ comp online. Chubb also operates a pharmacy benefit management program, which it claims saves patients 68% on medication costs. Read our Chubb business insurance review.
Auto-Owners Insurance
Best for: Discounts
Auto-Owners offers discounts if you buy multiple policies and pay your annual premium up front. It says you could save on workers’ comp by requiring employee drug testing, too. Policyholders also get free access to loss control and risk mitigation consultants. We haven’t written a review of Auto-Owners business insurance yet.
Erie Insurance
Best for: Fewest customer complaints
Erie got fewer complaints about its workers’ comp insurance than any other company we cover, given its market share. Policyholders can work with Erie’s risk control consultants to set up safety programs before injuries happen. If they do, Erie offers help creating return-to-work programs for injured employees. We haven’t written a review of Erie business insurance yet.
Pie Insurance
Best for: Managing your policy online
We don’t have enough complaint data to rate Pie Insurance. It gets an “excellent” financial strength rating from AM Best, though.
Pie Insurance is a relative newcomer to the insurance space (it was founded in 2017) that focuses on workers’ comp. The company sells workers' comp in 39 states plus Washington, D.C. You can get a quote online, then call to finalize it and buy coverage. Pie also lets you generate a certificate of insurance instantly online and file claims over the phone or via email. Read our Pie Insurance review.
What is workers’ comp insurance?
Workers’ compensation insurance is a policy that pays out if employees are injured on the job. In such instances, workers’ compensation insurance can cover their medical bills and some of their salary while they recover. It also can protect you, the employer, from some liability.
State laws require most companies to have workers’ comp. Even if you don’t have to, consider buying this coverage. The costliest type of workers’ comp claims — auto accidents — cost $91,433 on average, according to the National Safety Council . If your business couldn’t absorb that cost, you should have workers’ comp.
Save up to 30% on business insurance
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How do workers’ comp claims work?
Workers’ comp claims follow these steps:
- An eligible injury happens at work. Not all injuries are covered. Many states have exceptions for injuries that result from an employee refusing to use a safety device, using alcohol or drugs on the job or intentionally hurting themselves.
- The employee seeks medical care. Most health care providers will ask a patient if an injury was work-related, because that’s where they’ll send the bill afterward. In some cases, the patient may need to pay a bill out of pocket. Workers’ comp will reimburse them later.
- The employee reports the injury. The workers’ comp claims process starts with an employee reporting an on-the-job injury. Most employers ask employees to report injuries as soon as possible. If the employee doesn't report the injury quickly, they may lose out on workers’ comp benefits. In California, for instance, if an employee waits longer than 30 days to tell you about an injury and the delay prevents you from investigating the injury, then the employee could lose their right to receive workers’ comp benefits.
- The employer files a workers’ comp claim. After an employee reports an injury, the company needs to provide them with a claims form. This form asks for information like when and where the injury happened and what part of the body was affected. Once you have this information from the injured employee, you must file a claim with your workers’ compensation insurance provider within a certain period of time. You may also need to report the injury to your state department of workers’ compensation.
- The insurer investigates. This process may include interviews with the employer and employee and reviews of any relevant documents. After it’s complete, the insurance company will decide whether to approve or deny a claim. If they deny it and the employee wants to appeal that decision, they should file an appeal with their state workers’ compensation agency. The agency or a judge will review the case.
- Workers’ comp pays out. If the insurer approves the claim, the injured employee can begin receiving payment to cover medical bills and lost wages.
- Your costs may change. Your claims history plays an important role in how insurance companies determine your workers’ comp premiums. More claims typically equal higher premiums. Switching insurers won’t erase a previous claim from your history. But shopping around and getting quotes from multiple insurance companies may help you save money over time.
What does workers' compensation pay for?
A workers’ compensation policy will pay for an employee’s medical care, along with other costs during their recovery.
- Immediate medical care. This includes the costs of treating the employee’s injuries, such as doctor visits, surgeries, medication and medical equipment like wheelchairs. The health care provider should send bills directly to your workers’ comp insurance provider.
- Rehabilitation. Benefits often cover physical or occupational therapy. If an employee is unable to return to work due to long-term effects of their injuries, some workers’ comp policies will pay for vocational rehabilitation to train the employee for a new career.
- Temporary total disability. In most states, workers’ comp will pay around two-thirds of an injured worker’s weekly wages while they can’t work. This is subject to a minimum and maximum dollar amount.
- Lost wages. A partially disabled individual may be able to return to work, but not always in their previous role. If they now make less money, workers’ comp may cover part of the difference between their new wages and their old salary.
- Survivor benefits. If a worker is killed on the job, workers’ comp will generally cover funeral expenses and pay an ongoing benefit to their family.
Workers’ comp can also cover medical care for occupational diseases. These illnesses arise due to prolonged exposure to hazardous materials or other workplace conditions.
Does workers’ comp include employer’s liability insurance?
Most workers’ comp policies include employer’s liability insurance. This protects your company from lawsuits related to employee injuries. It can pay out to cover:
- Lawsuits that arise when an employee is injured on the job by a third party, like a customer, and sues both parties.
- Compensating a family member who has to care for the injured employee.
- Lawsuits against the employer in another context, like as the manufacturer of a product that caused an injury .
If you live in a state with a monopolistic system, your workers’ comp policy probably doesn’t include employer’s liability insurance. Talk to your agent about buying this coverage on its own.
🤓 Nerdy Tip
If your business provides services in multiple states, your policy must meet the requirements for all states in which it operates. What are the coverage limits for workers’ comp?
Workers’ comp policies have two “parts,” with different coverage limits for each.
There is no limit to how much your workers’ comp policy will spend on “Part One” or “Part A” coverage. This includes the injured employee’s medical expenses and lost wages .
“Part Two” or “Part B” of your policy is your employer’s liability insurance. This covers your company's legal expenses if an injured employee sues you. This coverage does have limits. These are usually:
- $100,000 per accident.
- $100,000 per employee.
- $500,000 per policy.
If your company sells to the federal government, you must have at least $100,000 in employer’s liability insurance — unless you’re in a monopolistic state.
What does workers' compensation insurance exclude?
Workers’ comp generally does not pay out for injuries that occur when an employee is:
- Under the influence of alcohol or illegal drugs at the time of the injury.
- On the company’s premises while voluntarily participating in a wellness program or recreational activity.
- Eating food that they have prepared for a personal meal.
- Commuting to or from the work site to their personal residence or for personal reasons.
- Off the clock — for instance, a lifeguard who goes swimming after her shift.
Who needs workers' compensation insurance?
Workers' compensation insurance requirements vary by state. In general, you need workers’ compensation if:
- You have employees other than yourself or your immediate family members.
- You work in construction, even if you have no other employees.
You can buy workers’ comp even if you don’t have to. Consider doing so. Most personal health insurance plans have exclusions if you’re injured at work. And without a workers' comp insurance policy, an injured employee could sue your business.
Beyond that, if other companies hire you as a contractor, they might require you to have workers' compensation insurance. That helps protect them from lawsuits.
How much does workers' compensation insurance cost?
Workers' comp premiums range from 34 cents to $1.68 per month per $100 of payroll, according to 2022 data from the National Academy of Social Insurance . This is their most recent data available.
But workers’ comp costs can vary significantly depending on what industry you’re in. Here are the median premiums for businesses in different sectors, according to 2026 data that 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. |
How much workers’ comp costs also depends on:
- How many employees you have. The larger your team, the more risk you’re exposed to.
- Whether you’ve filed a claim before. Insurance companies generally assume that if you’ve filed claims before, your workplace is more prone to injury than others.
- Where your business operates. Some states have higher medical or legal costs, which means higher premiums.
- Your policy limits. If you choose to increase your employer’s liability insurance limits, you’ll probably pay more for coverage.
Cost of workers’ comp claims
The average cost of a workers’ comp claim is around $47,000. That’s based on an analysis The National Safety Council did of 2022 and 2023 data from the National Council on Compensation Insurance (NCCI).
The most expensive types of claims were:
- Auto accidents: $91,000 on average.
- Burns: $65,000 on average.
- Slips and falls: $54,500 on average .
Typically, medical expenses make up about half of those costs. The other half is for wages the worker couldn’t earn while they recovered.
The cost of not having workers’ comp
It is illegal to not have workers’ compensation insurance if your state requires it. Usually, the penalty is a fine.
Examples include:
- In Minnesota, a business may have to pay up to $1,000 per employee per week they were uninsured.
- In Nevada, they may owe a fine of up to $15,000, plus premium penalties.
- In Illinois, the minimum fine is $10,000. You may owe up to $500 per day on top of that.
How to get workers’ comp coverage
Follow these steps to get the insurance coverage you need.
1. Learn about your state’s workers’ comp requirements
There are generally two ways to buy workers' compensation insurance: through a state fund or a private insurance company.
If you’re in North Dakota, Ohio, Washington, Wyoming, Puerto Rico or the U.S. Virgin Islands, you’ll have to buy insurance from your state fund. These are “monopolistic states,” which means the state government has a monopoly on the workers’ comp insurance market. You can’t get private workers’ comp in these states.
Some states run competitive state funds. These allow you to choose between a state fund and a private insurer. Other states rely totally on the private market.
2. Get quotes and buy a policy
If you don’t live in a monopolistic state, compare quotes from multiple companies. An insurance agent or broker can help you get these, or you can do it yourself online.
For most companies, cost is the deciding factor. But take note of other features and benefits of each policy, like:
- Credits for workplace safety programs.
- Flexible payment options.
- Health care provider network.
- Coverage limits.
Buy your policy by paying your annual premium upfront or enrolling in automatic payments. Make sure you understand how to file a claim.
At the end of your policy period, your insurance company may audit your premiums to make sure you’re paying the right amount. They want to make sure you accurately classify employees and contractors and describe what kind of work they do. When employee responsibilities change, their risk level does too.
During your premium audit, the insurer will probably ask to see documents like:
- Payroll reports.
- Tax forms, like 1099s and 1040s.
- Records of your payments to contractors and subcontractors.
- Lists of employee duties.
Sometimes audits find that you underpaid for workers’ comp. In that case, your insurance company might charge you an additional premium. If they find that you overpaid, you might get a refund or credit.
If you disagree with what an audit found, you can dispute it. But don’t refuse a premium audit. If you do, your insurance company can cancel your policy and charge you a fee.
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- 1. NSC Injury Facts. Workers’ Compensation Costs. Accessed Mar 10, 2026.
- 2. IRMI. Understanding Employers Liability Coverage. Accessed Mar 10, 2026.
- 3. Insurance Information Institute. Workers Compensation Insurance. Accessed Mar 10, 2026.
- 4. National Academy of Social Insurance. Workers' Compensation: Benefits, Cost, and Coverage. Accessed Mar 10, 2026.
- 5. NSC Injury Facts. Workers' Compensation Costs. Accessed Mar 10, 2026.
On this page
- Best workers’ comp companies
- What is workers’ comp insurance?
- How do workers’ comp claims work?
- What does workers' compensation pay for?
- What are the coverage limits for workers’ comp?
- What does workers' compensation insurance exclude?
- Who needs workers' compensation insurance?
- How much does workers' compensation insurance cost?
- How to get workers’ comp coverage
