Workers Compensation Insurance

What does workers' compensation pay for?

Benefits depend on state law, but typically include:

• Medical care for work-related injuries and illnesses.
• Rehabilitation to help an injured worker recover.
• Part of lost wages while the employee can't work.
• Death benefits for dependents and a funeral benefit.

This no-fault system generally replaces an employee's right to sue you over a workplace injury. See what workers' comp covers for more detail.

When does your state require coverage?

The NAIC's 2026 guidance says coverage is mandatory for most employers in every state except Texas, which lets employers opt in. Many states exempt businesses with few employees, and no two states have exactly the same laws.

• California's September 2024 fact sheet requires coverage even with just one employee.
• Florida's undated coverage guidance requires it with four or more employees outside construction and one or more in construction.

Check your state's requirements before hiring. Our guide to how workers' comp works explains the system.

Do owners and contractors count as employees?

Employees generally include people working at your direction for pay, including minors. California's 2024 fact sheet includes part-time workers.

In most states, sole proprietors and partners aren't required to cover themselves but can choose coverage. Florida counts corporate officers and limited liability company members toward its thresholds unless they qualify for and take an exemption.

Independent contractors may not count. But most states treat uninsured contractors, subcontractors or a subcontractor's uninsured workers as your employees for workers' comp purposes.

What happens if you skip required coverage?

You may still be legally liable when an employee is hurt, even if insurance wasn't required. A serious injury claim could bankrupt a small business.

California's 2024 fact sheet calls going without required coverage a criminal offense. Florida's undated enforcement guidance describes job-site inspections and stop-work orders. Its penalty equals 2 times the manual premium you would've paid within the preceding 12 or 24-month period.

How are workers' comp premiums calculated?

Payroll and job classification codes, which group similar work, drive your premium. NCCI's 2025 guide explains that a state-approved rate applies per $100 of payroll. That's a payroll unit, not a policy price. Riskier work carries higher rates.

For qualifying employers, experience rating compares claims history with similar employers. Under that 2025 guide, it usually uses the latest three years of data. A modifier below 1.00 is a credit; above 1.00 is a debit. More frequent claims generally raise future costs, while smaller employers' own records count for less.

Our workers' comp cost guide explains the pricing factors.

Where should you buy workers' compensation?

Workers' comp is separate from a business owner's policy. In most states, private insurers compete. California recommends buying through an agent or broker from a licensed insurer.

The American Academy of Actuaries' 2025 brief identifies four monopolistic states where the state fund is the only insurance option: North Dakota, Ohio, Washington and Wyoming. Elsewhere, some state funds compete and may serve as insurers of last resort. Large, financially stable companies may qualify to self-insure.

If private insurers decline you, ask about the residual or assigned risk market. It requires evidence of those declines; premiums tend to be considerably higher and policies typically cover only basic statutory requirements.

Compare services, access to claims adjusters and network doctors, not just price. Report payroll and duties accurately; misrepresentation can trigger a Florida stop-work order. Then compare workers' comp quotes for your business.