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What workers’ comp covers
| Coverage | What it pays for |
|---|---|
| Medical care | Treatment for work-related injuries and illnesses |
| Lost wages | A portion of pay while an employee can’t work |
| Rehabilitation | Physical therapy and retraining |
| Death benefits | Payments to dependents after a fatal work injury |
| Employer’s liability | Legal costs if an employee sues over an injury (usually included) |
Who must carry it
- Employers with employees in almost every state, though some states exempt very small employers or certain workers, such as some agricultural or domestic workers.
- Texas doesn’t require most private employers to carry it, but employers that opt out lose important legal protections.
- Sole proprietors and partners without employees usually aren’t required to cover themselves but can often choose to, and clients sometimes require it.
- Independent contractors generally aren’t employees, but misclassifying workers can lead to penalties and back premiums.
Separately, employers in California, Hawaii, New Jersey, New York and Rhode Island must provide state disability insurance for non-work injuries and illness. Check your state’s labor or insurance department for exact rules.
How premiums are calculated
Workers’ comp is priced per $100 of payroll, using a rate for each job classification. Roofers cost far more than office staff. The rate is then adjusted by your experience modification, which compares your claims history with similar businesses. Your premium is estimated at the start of the year and adjusted after an audit of actual payroll.
Simple example: an office with $200,000 of clerical payroll at a hypothetical rate of $0.20 per $100 would pay about $400 a year before adjustments; a contractor with the same payroll in a high-risk class would pay many times more.
The market in 2026
NCCI’s 2026 State of the Line report found the workers’ comp market remained profitable in 2025, with a combined ratio of 91 (up from 86), and premiums roughly flat (down 0.2%). Lost-time claim frequency fell 2%, but medical and wage-replacement costs per claim each rose 4%, a trend that may push prices up in some states.
What it costs
Insureon’s small business customers paid a median of $54 a month ($648 a year), but most had very small payrolls. See our cost guide.
How to lower workers’ comp costs
- Classify jobs correctly so office staff aren’t rated as field workers.
- Run a safety program and train staff; fewer claims improve your experience modification.
- Report injuries promptly and support return-to-work programs.
- Consider pay-as-you-go billing based on actual payroll to avoid large audit bills.
- Compare insurers and your state fund, where one exists; see our insurer comparison.
Frequently asked questions
Is workers’ comp required for small businesses?
Yes in almost every state once you have employees, with some exemptions for very small employers or certain workers. Texas doesn’t require most private employers to carry it.
How much is workers’ comp for a small business?
A median of about $54 a month in Insureon’s 2026 data, but it depends heavily on payroll and job types.
How is workers’ comp calculated?
By multiplying payroll (per $100) by the rate for each job classification, then adjusting for your claims history.
Do I need workers’ comp for myself if I’m self-employed?
Usually not required, but you may choose it, and some clients require proof of coverage.
Does workers’ comp cover independent contractors?
Generally no, but misclassifying employees as contractors can lead to penalties.
Sources
- U.S. Small Business Administration – Get business insurance
- Pie Insurance – Workers’ comp in Texas
- Patriot Software – State disability insurance (Aug 2026)
- Insurance Journal – NCCI State of the Line 2026
- Insureon – Small business insurance costs (Feb 2026)
Insurance prices, discounts and rules change often and vary by state. Figures were checked in October 2026; confirm details with the insurer or your state insurance department.