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What is workers’ compensation insurance?
Workers Compensation insurance gives medical and wage benefits to people who are injured or become ill at work. It can cover medical bills, lost income, and even death benefits.
Most states require insurance for businesses with employees, however, each state has its own guidelines for coverage and benefits.
How much is workers’ compensation insurance?
The cost of workers’ compensation insurance depends on a few factors. In general, companies with more employees and riskier work environments will pay more for workers’ comp.
The cost of workers’ compensation depends on
- The state or states where your team works
- Your payroll amount
- Your industry
- The type of tasks done by your team
- Your claims history
Hourly can help small businesses reduce costs by letting your team switch class codes on the fly to keep up with the type of work they’re doing.
When do I need to buy workers’ compensation insurance?
In most states, you need to have a policy in place as soon as you hire a new employee. Coverage typically begins after you buy the policy, and only applies for events that happen after the policy start date.
What happens if I don’t have workers’ compensation insurance?
Workers’ compensation is required in most states for businesses with employees. Business owners who don’t buy a policy when it’s required can face penalties and jail time.
Fines and jail time
Not carrying workers’ comp coverage in California is a criminal offense punishable by up to $100,000 in fines or imprisonment for up to 18 months.
Other states have similar penalties.
Injured workers could sue
Beyond penalties and jail time, an injured employee could sue to recoup their medical costs and lost wages.
Who is exempt from workers’ compensation insurance
Some businesses aren’t required to have workers’ compensation insurance.
Here are some situations that might exempt a business owner:
- The owner is a sole proprietor
- The business is based in Texas
- The owner only employs their immediate family
- The owner doesn’t employ enough people to hit a minimum employee threshold
Additionally, these people generally don’t need a policy:
- Independent contractors
- Members of an LLC
- Corporate officers who own a certain amount of stock
Get a free quote today to see which exemptions apply to you.
How is workers' comp calculated?
Workers’ comp insurance premiums are calculated based on the type of work your employee does — the class code, and the number of prior claims your business has had — your experience modifier or X-mod.
Your premium can be broken down into a simple formula like this:
Payroll (per $100) X Class Code Rate X Experience Modifier + State Taxes & Fees
There may be other factors that go into your premium depending on your carrier and state. Get in touch with your agent to find out more.
How do I buy workers’ comp insurance?
Buying a workers’ comp policy is simple and straightforward.
Most states have a state fund that provides a simple coverage option for everyone. Private insurance carriers also offer coverage, though they can be pickier about who they’ll cover.
Hourly offers an easy way to sign up for workers’ comp insurance through your agent or broker. Ask your agent about how much you can save by switching to Hourly.