Workers compensation insurance

Workers compensation insurance covers medical expenses, lost wages, and death benefits for employees injured or killed in the course of employment. It also protects employers from most personal injury lawsuits by employees.

Workers comp is mandatory in nearly all states for employers with more than a minimum number of employees (the threshold varies by state — typically 1-5 employees). Premium is calculated as: payroll × industry rate × EMR. Industry rates vary dramatically by risk class — clerical work (Class 8810) might be $0.10 per $100 of payroll; roofing (Class 5551) might be $25 per $100 of payroll. Trade-specific rates: HVAC service ~$3-7 per $100, plumbing ~$4-8 per $100, electrical ~$2-5 per $100, lawn care ~$3-6 per $100, roofing ~$10-25 per $100.

For service operators, workers comp is a major operating cost. Strategies for controlling cost: classify workers correctly (some workers have multiple class codes; correct allocation can lower effective rate), maintain accurate payroll records by class, invest in safety programs to control EMR, return injured workers to light-duty assignments quickly to limit claim severity. Some states allow self-insurance for larger employers; this is rarely worthwhile until premium costs exceed $250,000+ annually. Working with an independent agent specializing in service-business workers comp typically yields better rates than direct-to-carrier shopping.