How Much Should Workers’ Comp Insurance Cost?

Owning a construction business is rewarding. It can mean creating something meaningful from scratch, developing homes, businesses and common areas—and helping your customers improve their lives.

Owning a construction business is also challenging. It can mean working long hours onsite, making difficult decisions and communicating them to customers, and sustaining setbacks of various kinds.

Sometimes, those setbacks may include preventing and responding to accidents in the workplace.

Why Construction Businesses Need Workers’ Comp Insurance

If you own a construction business, your operation is bound to encounter certain risks. As the owner, you’re often responsible for mitigating these risks and avoiding dangerous scenarios for you and your employees. That’s where workers’ comp insurance comes into play.

Workers’ comp insurance, which is legally required for most businesses with employees throughout the United States, helps provide medical, rehabilitation and disability benefits for construction employees who are injured in the workplace. Workers’ comp insurance may also pay death benefits to dependents of employees if they are killed in an on-the-job incident. Additionally, workers’ comp insurance can help protect construction businesses from liability for workplace injuries (and help minimize out-of-pocket payments for those injuries).

In other words, workers’ comp insurance is good for employees—and good for employers.

Of course, all good things come with a price tag. For many construction business owners, the high cost of purchasing workers’ comp coverage is a burden to their finite resources. So, how much should workers’ comp insurance really cost?

How the Cost of Workers’ Comp Insurance Is Calculated

The cost of workers’ comp coverage is calculated using four main factors.

1. Business Location: Workers’ comp insurance is regulated at the state level, so the location of your work affects your workers’ comp insurance costs.
2. Work Type: The type of work performed by employees determines your classification codes or “class codes.” These codes are typically defined by the National Council on Compensation Insurance (NCCI).
3. Payroll Size: Workers’ comp insurance rates also depend on the size of your workforce and—more specifically—your total payroll. It’s important to report your payroll accurately because the amount directly affects your workers’ comp insurance premium.
4. Claims History: By law, insurers must use an experience modification factor to determine your workers’ comp insurance rate. The “experience mod” factors in your claims history, so it directly reflects your workplace safety.

How to Save Money on Workers’ Comp Insurance

As you probably know, there are many other factors that impact the cost of workers’ compensation. Rates change regularly, business safety practices can impact premiums, and team members’ commitment to rules and regulations can make a big difference in your overall cost. Additionally, you’ll likely pay higher premiums than many other business owners who work in industries that are considered “less risky” than construction. In fact, the construction industry has one of the costliest average premiums in the nation—which means finding the best (and most recent) available rate is incredibly important for construction business owners. Fortunately, Pie Insurance helps construction business owners across the nation save up to 30% on workers’ comp insurance coverage.

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