Quick Answer: Workers' compensation insurance covers employee medical bills and lost wages from work injuries. Most states require it the moment you hire your first employee. Annual premiums range from $800–$15,000+ per $100,000 payroll depending on trade.
What Is Workers' Compensation Insurance?
What Workers' Comp Covers
- Medical expenses: ER visits, surgery, physical therapy, and prescription drugs related to the work injury
- Temporary disability: Wage replacement (typically 60–70% of weekly wages) while the employee recovers
- Permanent disability: Lump sum or ongoing payments if the worker can't fully recover
- Death benefits: Funeral costs and survivor benefits if the injury is fatal
- Employer liability: Legal defense costs if an injured employee sues
What Workers' Comp Does NOT Cover
- Injuries to independent contractors (1099 workers) — they must carry their own coverage
- Injuries caused by employee intoxication or intentional self-harm
- Injuries during a commute (not on the job site)
- Emotional or psychiatric claims without a related physical injury in many states
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Annual Premium by Trade
| Trade | Avg Annual Premium per $100,000 Payroll | Risk Class | Notes |
|---|---|---|---|
| Electrical (inside wireman) | $2,000–$4,000 | Medium-High | Arc flash, fall risks |
| Plumbing | $1,800–$3,500 | Medium | Confined space, burn risk |
| Roofing | $6,000–$15,000 | Very High | Highest fall risk category |
| General Carpentry | $2,500–$5,000 | Medium-High | Power tool, fall risks |
| Landscaping | $1,500–$3,000 | Medium | Heat, equipment injuries |
| Janitorial/Cleaning | $800–$1,500 | Low-Medium | Slip/fall, chemical exposure |
| HVAC | $2,000–$4,500 | Medium-High | Height, refrigerant risks |
| Concrete/Masonry | $3,000–$6,000 | High | Heavy lift, equipment injuries |
How to Reduce Your Workers' Comp Premium
Your experience modification factor (EMR) drops when you have fewer claims. Invest in safety training, proper PPE, and documented safety programs. An EMR below 1.0 qualifies you for premium discounts and often helps you win more bids from commercial GCs who screen by EMR.
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View on Amazon →Is workers' compensation required for contractors?
In most states, workers' comp is required once you have at least one employee (in some states, one part-time employee counts). Sole proprietors are often exempt but may need it to qualify for certain jobs or bids.
What does workers' comp cover?
Workers' comp covers medical expenses for work-related injuries, temporary and permanent disability benefits, lost wages during recovery, and employer liability if the employee sues.
How is workers' comp premium calculated?
Premium = (payroll / 100) × class rate × experience modification factor. High-risk trades (roofing, electrical) carry higher class rates than low-risk work (clerical, landscaping).
Can I be exempt from workers' comp as a sole proprietor?
Yes, in most states a sole proprietor with no employees can opt out. However, some commercial clients and GCs require you to carry it regardless of exemption eligibility.
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