Sarasota Insurance Agency >> blog
Your small business should carry workers’ compensation insurance because almost every state requires it. Even if your state doesn’t require it, as in Texas, your customers might not do business with you unless you carry it. State-levied penalties for not carrying workers’ compensation can be stiff.
Specific requirements vary from state to state. For example, farming employees and self-employed persons are exempt in some states. (Here’s a list of state-by-state rules.) And remember, states do not provide the insurance—insurance must be purchased in the private marketplace, and options are sometimes limited.
In most states, workers’ compensation insurance is required as soon as you have one or more employees who aren’t the business owner or partner.
Cost is determined by the workers’ compensation board in your state, but most states use a similar formula to calculate rates: classification risk, multiplied by 1% per $100 of an employee’s payroll.
For Instance, Each occupation is assigned a “risk classification” determined by two factors: frequency of injury at work and severity of the injury. Then the classification is assigned a dollar amount based on the risk. For example, clerical workers in California have a classification of $1.25—a lower risk. If an office manager makes $600 per week, the workers’ compensation premium for that employee would be $7.50.
Your premiums, however, can be increased or decreased based on your business’ safety history, whether you offer health insurance and other factors.